The standard economic model of decision making assumes a decision maker makes her
choices to maximize her utility or happiness. Her current emotional state is not
explicitly considered. Yet there is a large psychological literature that shows that
current emotional state, in particular positive affect, has a significant effect on decision making, problem solving, and behavior. This paper offers a way to incorporate this insight from psychology into economic modeling. Moreover, this paper shows that this simple insight can parsimoniously explain a wide variety of behaviors.