Introduction

It is much more important for people's well-being that their preferences genuinely express their authentic values and the deepest, least conflicted elements of their personalities than that their market choices be consistent or meet other formal criteria for economic rationality. On reflection, one finds it astonishing that the analyses of economic choices whose purpose is to maximize satisfaction should devote so much attention to the relatively minor problems of transitivity and consistency when the relation between what is chosen and long-term satisfaction is ignored.

In this chapter we will examine this relationship between the choices people make and their long-term satisfaction. In the process I will put in context the particular problem of the previous chapter: What accounts for the persistent belief that money is so important to happiness? We will look first at some preliminary evidence in the quality-of-life studies suggesting people's misinterpretation of their own moods, and then proceed to explore several sources of misinterpretation, such as the separation of thought and feeling in assessing one's well-being; the pursuit of desires that are compensatory for other, frustrated, primary desires; the way people misinterpret their ambiguous feelings of arousal; and how they may, without realizing it, violate biologically favored programs. Following each of these psychological explanations we turn to market sources and consequences of such misinterpretation.

As mentioned, my principal thesis is that happiness and a satisfying life have much more to do with an accurate assessment of the sources of one's feelings of well-being than with “rational expectations,” transitive preferences, marginal equivalences, and objective payoff matrices.