Nobel laureate Daniel Kahneman founded of the branch of economics called behavioral economics -- the study of how we decide. Making choices which concern our well being seems to be influenced by two different forces. Our experiencing self and our remembering self. Keeping the two in balance is key. 

Daniel Kahneman, speaking at the February 2010 Ted Conference in Long Beach, California, presents the idea that our decision making regarding our well-being is strongly influenced by two competing forces -- our remembering selves and our experiencing selves. The two are quite different and keeping them in balance appears to be essential.

He describes multiple cognitive traps which we can fall into as we try to think about happiness. There is the ambiguity that comes from the many meanings we assign to the simple word "happiness". Happiness is not equal to well being. Well being may be a more precise term and is the phrase Kahneman uses more often during his talk.

There is also the "focusing illusion" which causes us to place disproportionate emphasis on the particular factor we happen to be thinking about at that moment. His talk at Ted emphasized the importance of understanding experience vs. memory.  Our sense of an event's contribution to our well being during the experience is different than our memory of the event later.  We rely on our memory to tell us a story of the event later and thus our the story, repeated over-and-over again, carries more weight than the actual experience.

Imagine a delicious meal at your favorite restaurant. Everything is delightful.  You are surrounded by friends, the wait staff is attentive, there is laughter and good food.  The last spoonful of your desert reveals a dead fly in your créme brulée. Disgusting!

The next day a friend asks "How was dinner?" and you reply "I'll never eat at that restaurant again! There was a fly in my desert!"

The story is that you were disgusted. The fact that you experienced 2+ hours of a perfect dinner is lost because your remembering self has chosen to tell a story which is at odds with your voiceless experiencing self.

The title of this article is somewhat beside the point of the talk and relates to the brief Q&A period where Chris Anderson and Daniel Kahneman discuss the findings of a Gallup survey that discovered an interesting point of inflection in the data correlating happiness with income levels.  Based on the survey, income has an effect on happiness only up to about $60,000.  Below that level, lower incomes correlate with less happiness.  Above that level and the effect plateaus.  There is some minimal level of happiness shared by people who are not suffering privation on a daily basis.  This has potential to influence public policy and provides some basis for the claim that money can make you happy, but only up to a point.