People know if they're happy or not. 
I take offense with the view of some members here that some countries are happier than they "should be." 
To be honest, I see nothing wrong with a study that asks people whether they're happy or not, then compiles the results. If people in Colombia consider themselves happier than people in Russia, that's their decision. 
This index is not a matter of researchers deciding which countries are the happiest, then listing their opinions. It's the product of surveys of the citizens within those countries, if I read the page right.
Sure, you might wonder why the endangered, malnourished citizens of Colombia are happier than the well-educated, protected citizens of Russia. Nevertheless, it does little good to go up to a Colombian and say, "you shouldn't be happy! Look at all these statistics on your country!" or approach a Russian and say, "Well, based on your literacy and your income, shouldn't you be happier?" 
People might not know much, but they do know whether or not they're happy. With that in mind, I don't see any problems with a study that asks citizens if they're satisfied with life, then compares the responses across countries.