What does Victor Frankenstein mean when he says the happiest people are the ones who think that

their own little village is actually the entire world ?

Frankenstein means that the larger concerns of humanity make people sadder.

Explanation:

Frankenstein means that there is a larger philosophical concern in actually knowing what goes on in the world as a person who knows of all that exists in the world will wonder why such injustice exists and can never be in peace.

Thus in certain ways the people who live confided to their own comfortable spaces are living much better lives than the ones who are out in the world and struggling with its cruel nature and the facts of these injustices.