To be happy, a person needs to see something valuable about his or her character. This is no easy matter because it is often difficult to develop a virtuous character. We develop a good character by practice, by actually living through difficult experiences and learning to master them. The problem is that in the short run, weakness of will may lead people to develop vices instead of virtues, even though they would be happier in the long-run if they developed a character they could be proud of. Though not immediately obvious, the connection is interesting.
Governments have two sorts of policies with profound effects on the development of virtue.
At the same time, governments often take care of people who are suffering because of their own irresponsible behavior. The free-market policy, naturally, is simply the negation of both. The problem with the paternalistic variety is that at best it merely compels good outward behavior. But internal strength of character tends to atrophy due to lack of opportunity to practice self-regulation. For example, if it were possible to successfully ban alcohol, alcohol abuse would cease to exist.