I believe that keeping an animal in conditions that don't allow it to exhibit natural behavioral patterns is bad practice.
: Pseudosphromenus cupanus inhabits lowland streams, freshwater ponds and even ditches. It is a hardy species and is a very excitable bubblenester and jumps more often than other bubblenest building fishes (Chhapgar and Manakadan 2000).
So my bowl is a ditch in this example. It's still a natural condition in which the animal lives, as you said. To say that the fish would be "happier" in a larger environment is projecting human emotions on the fish of which it does not posses. If the fish is health and active it's "happy".