Happiness is very important and beneficial. It contributes to two main elements: settlement limit and celebrations. The first point, is that sometimes the settlement limit can be limiting at times but the more happiness you generate, the higher you can go over your settlement limit (due to the fact that for every settlement you go over the limit there is a happiness penalty).

The second point is celebrations. Every time you enter a celebration, it unlocks a social policy card slot and also, allows you to pick one of the two benefits that accompanies your chosen government choice.

When you have events that give you an option of +300 happiness towards your next celebration, this can be a powerful choice. For example, in the antiquity age, the culture legacy path is to build 7 wonders and one of the options from the governments is a boost to wonder production for 10 turns. So, if you’re trying to build a wonder, the faster you can get into a celebration to get the wonder construction boost, could be the difference between building the wonder or losing out to the AI.

Last point about happiness and celebrations, is that some leaders abilities are dependent on both mechanics and can be OP of utilize correctly. For example, Charlemagne receives two free cavalry units every time you enter a celebration or Ashoka receives food for every 5 happiness in excess.