When it comes to our experiences in life, people don't necessarily measure "good" or "bad," we measure change. We compare differences. For example, if I blindfolded you and placed a wooden block in each hand, would you then notice if I proceeded to place a five ounce pack of gum on top of one of the blocks? Before your brain gets too strained trying to contemplate the answer, the only true answer is this: it depends. And what it depends on is the comparison provided to our senses. If the block weighed a mere ounce, then you would certainly notice a 5 ounce pack of gum placed on top of it, as this would represent a five-fold increase in the weight on your hand. But if that block weighed 20 or 30 pounds, you'd never notice a mere 5 ounce increase on top of it. Our brains detect changes in weight, not necessarily the weight itself. (Kahneman & Tversky, 1979) Likewise, you don't consciously feel the clothes you wear around on your body, as the brain ignores this input. You only feel sensations when taking clothes on or off or when they are otherwise disturbed, since this represents a change in sensations, which bring these changes to our awareness.
Our psychological states work in essentially the same way. We are difference engines; measuring our particular circumstance against a perceived frame of reference. This means that our perception of a particular circumstance varies quite a bit in relation to what we compare it to. Most people are willing to drive across town to save $50 on the purchase of a $100 dollar radio but not on the purchase of a $100,000 automobile, even though the savings (the potential reward) are exactly the same either way. (Pratt, Wise & Zeckhauser, 1979) Change the reference point in the mind, and our attitude towards something also changes. The end result is that our thinking becomes distorted in several ways: