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Individuals are typically happy when engaging in enjoyable activities. But many enjoyable activities could be harmful when engaged in to excess. Do children consider the normative goodness of activity engagement levels when attributing happiness? To examine this question, we presented children with enjoyable activities that are often harmless in moderation but harmful in excess. When told that engaging in their favorite activities at their preferred amount was either normatively good (i.e., harmless and permitted) or normatively bad (i.e., harmful and forbidden), 10-11-year-old and 7-8-year-old children (Study 1), and even 5-year-old children (Studies 2-3, with simplified methods) attributed less happiness when the engagement level was normatively bad than normatively good, both to themselves and to another child. Young children also perceived normatively bad engagement as less interesting and pleasurable (Study 3). The findings suggest that children consider the normative goodness of activity engagement (rather than enjoyment alone) when attributing happiness, illuminating how children understand happiness.