[Alneyan]

It looks like the natural decrease is actually a variation back to Indifferent level. Jubilant Empires tend to go back to Indifferent if there are no troops or an UPC on the planet, and Angry worlds can go back to Indifferent level as well. (I have never seen a rioting world going back to another level on its own though)

I ran a test with two Empires, one with 100% happiness and the other one with a mere 40% happiness. (50% Environmental Resistance and 50% happiness) Here are the results:
- Both Empires go back to indifferent level in the first few turns. (On turn 2 for 40% happiness, on turn 3 for 100% happiness) I will assume it would be the same if you raise happiness, unless you do go overboard on this characteristic to offset natural decrease.
- After many turns, both Empires remain at indifferent level, thanks to this natural decrease. If there were no natural decrease, the worlds of the 40% happiness would slowly go down in happiness. (With 1,2% more angry people every turn, your Empire would collapse easily I guess) Then troops would obviously be a priority, and lowering Happiness to 50% would be very risky to say the least.
- However, my 40% happiness didn't seem to be able to overcome the effects of losing several planets (including the homeworld) and battles, as all the worlds were on angry. On the other hand, the 100% happiness Empire eventually recovered from these effects, although the process needed about 15 turns to go back to Indifferent level. Please note that in a regular game, other attacks would have been likely, thus offseting this natural increase if no troops/UPC are present.

So, it seems like the only disavantage when lowering happiness is that you are a bit more vulnerable to happiness loss than before. But you will still have +1% happiness per turn, so it should be enough to deal with minor events such as the loss of a few ships here and there. If the situation is much worse, such as the destruction of several planets each turn, I would believe there isn't much left to do and +2% happiness will not help as losing a planet means -5% happiness. In both cases troops seem the only proper solution along with the UPC, and you would need 10 troops per planet to offset the 50% happiness disadvantage. (Or you could rely on the UPC with its +6% happiness per turn at level III)