Governments do not now pursue income maximisation at the expense of everything else. Virtually all governments impose unnecessarily distortionary taxation... They subsidise culture and education in excess of the strict utilitarian minimums. They impose progressive income taxation and distort value-added taxation in the name of income distribution. Moreover voters demand such things. The short answer therefore is “of course not”. The real question is should we try to quantify the touchy-feely things like income distribution, cultural values, quality of life, man’s inhumanity to man? There I’d say that the effort is worthwhile (and already undertaken to some extent in the Human Development Index approach). However, as the piercing analysis of Martin Ravillon shows such indices must be interpreted with care. The best strategy is probably to have a number of them developed by a range of government and non-governmental agencies.
But happiness and income seem to go hand in hand. Hence it might not be such a drastic change to target happiness. But as Harold James notes, it is not clear if we are measuring short or long term wellbeing. In Latin, these are two different words. Felix is the short-term state of happiness while beatus is the longer term state. He said we should try to measure the latter.