The recently burgeoning literature of Happiness Economics unearths the undesirable side-effects of economic growth and criticizes the economic model that is based on the militant belief in the supremacy of extrinsic market-relations over the relational bonds of society. The power of the capitalist engine of progress has been witnessed not only in ever-increasing per capita income levels of the commanding heights of the world economy, but also thrusting its roots into and transforming the laggards of the race. Economic growth may bring about substantial increases in material well-being; yet, at the same time, unfettered and not channeled properly, it has the potential to destroy the social and environmental fabric of society. This dynamics is certainly visible in the post-World War II cross-country variability of the subjective well-being—happiness and life-satisfaction—measures, which can be explained with reference to the differences in the level of social capital, which is a concept that covers relational goods, associational activities, and trust in institutions. In contrast to the traditional wisdom, in the long run, indicators based on GDP figures do not reflect the international differences and lack explanatory power. These themes clearly echo Karl Polanyi’s concerns over the destructive effects of the self-regulating market mechanism presented in his now-classic The Great Transformation. In this paper, our aim is to shed light on the relevance of the interdisciplinary work of Polanyi for the Happiness Economics literature by focusing on the interwoven relations between state, markets, democracy and values. We believe, Polanyi’s conception of the self-regulating market system has as a corollary the de-regulation of unhappiness on an ever-expanding scale. The treatment of labor as a fictitious commodity is of utmost significance in this respect. No less important is the similar degrading of land, that is, nature, a proxy for environment.  Furthermore, the distinction Polanyi maintained between ‘exploitation’ and ‘cultural degeneration’ in assessing the balance-sheet of the Industrial Revolution and colonialism is a useful instrument for this intended critique.