The NEF's 'Happy Planet Index,' which was launched for the first time last week, seeks to move beyond the usual country ratings based on national income, measured by Gross Domestic Product (GDP), to produce a picture of the progress of nations based on the amount of resources they use, and the length and happiness of people’s lives.

The Happy Planet Index covers 178 countries by multiplying life expectancy by life satisfaction, and dividing it by environmental impact in each country, including carbon emissions.

The results are surprising. While the countries of Central America dominate the top positions in the index - nations which are perhaps most commonly associated with war and political instability - the rich nations of the G8 are placed well down the rankings.

However, it is Vanuatu which takes top spot in the index. According to the NEF, the 200,000 residents of the 80 or so islands that make up Vanuatu are the happiest in the world because they "can live long, happy lives without using more than their fair share of the earth's resources." This despite the fact that the average GDP per head is just $2,900 - far below that of the wealthiest countries.

The country can also be considered as something of a tax paradise. Vanuatu does not levy tax on personal incomes, corporate profits, dividends or capital gains. There are also no withholding taxes or sales taxes.

Following Vanuatu in the top five were Colombia, Costa Rica, Dominica and Panama. By contrast, the highest ranked G8 country is Italy at 66th in the index. Germany is 81st, Japan 95th, the United Kingdom 108th, Canada 111th, France 129th, the United States 150th, and Russia 172nd.

“We are used to comparing countries in terms of crude riches or what they trade. There are international league tables for performance on issues from corruption to sporting success. But, NEF’s Happy Planet Index measures something much more fundamental. It addresses the relative success or failure of countries in giving their citizens a good life," commented Andrew Simms, NEF’s Policy Director.

According to the index, island nations generally have a higher life satisfaction. Malta tops the Western world with Cyprus in seventh place out of 24 (although the UK is evidently the exception to this rule, placed just below Libya and just above Laos in the index).

Switzerland, with its small ecological "footprint," was the happiest European country.

"The order of nations that emerges may seem counter-intuitive. But this is because, to a large degree, policy makers have been led astray by abstract mathematical models of the economy that bear little relation to the real world,” Simms added.

In Asia, Vietnam scored highest and was placed at number 12 in the index. Singapore was ranked lowest at 131.

Perhaps unsurprisingly, seven of the ten countries at the bottom of the index are located in Africa, with Zimbabwe placed at the foot of the ranking.

The NEF is a think tank founded in 1986 by the leaders of 'The Other Economic Summit' (TOES) to force issues such as international debt onto the agenda of the G7 and G8 summits.