Nephi does not say that they were happy. He says that they "lived after the manner of happiness." In Nephi's terminology, this would mean following the path of the Gospel as Nephi understood it. Nephi's use of the word is probably a result of Lehi's understanding and use of that concept: "2 Ne. 2:10 And because of the intercession for all, all men come unto God; wherefore, they stand in the presence of him, to be judged of him according to the truth and holiness which is in him. Wherefore, the ends of the law which the Holy One hath given, unto the inflicting of the punishment which is affixed, which punishment that is affixed is in opposition to that of the happiness which is affixed, to answer the ends of the atonement--" Lehi considers happiness one of the eternal results that is affixed to eternal law. The obedience to Law produces happiness as a result. This is surely Nephi's meaning when he says that they lived after the manner of happiness. They lived the Law that would lead to happiness.