Interesting exercise.
The first step in the process that Ken describes seems by far the most critical: what is the goal or "want," and what values does it reflect? If my goals are to proclaim my affluence to the world and bully my way through traffic, I might decide to buy a Hummer (R.I.P.!) despite the obvious conflicts with other values (humility, reduction of resource consumption and carbon footprint, traffic safety and so forth). But I could achieve the same goals by other means, like buying a supersized Ford Intimidator or something similar. The decision about a suitable means seems more amenable to rational analysis, and less laden with emotional baggage, than the initial "want" calculation.
Another example: if a society decides to ensure adequate health care for 100% of its population, a "single-payer" system quickly emerges as the most rational means to accomplish that (although other schemes may be worthy of consideration). But when other values (like allegedly saving taxpayer money and "personal responsibility") conflict, the means analysis leads to the kind of sausage legislation that emerged this year.
This is not to say that the decision about means is unimportant and always rational, but that choice often follows from the fundamental decision about ends. Or so it seems to me at the moment.
I look forward to downloading the podcast.

Intriguing. This may change the way I see my boss; what he values is my production, because it is his responsibility; my happiness is not his, so he assumes it can go away without any change in production.

Through out our whole life we are seeking out the thing which we exactly want but fail to identify that. If we never understand ourselves then how could we judge that we are rational? It?s like illusions.

This is an area which is desperate need of some intro phil of logic to make some simple distinctions and points. Here is what I think philosophers could contribute, starting with their understanding of translating english if, then into material implication.
Recap on if, then and material implication.
If we want a simply formal model of the english if, then, our formal translation is uniquely satisfied by material implication if:
a) the translation is truth functional, doesn't depend on the semantic parts in "if a, then b."
b) the translation preserves two formal features of the english if, then.
1) if then is reflexive.
2) if then is not sysmetric.
c) finally, the truth value for if then when a is true and b is false is false.
We translate the english if then, such that it is a truth functional translation which preserves several formal features.
As a consequence, we get both the paradoxes of material implication and the failure of even smart individuals to locate material implication in Wason's selection task.
These two features, some odd formal paradoxes and the inability of english users to recognize the formal translation are good analogues to what is happening in preference theory. Here is why.
Preference Theory
We start with with the english relation "x is preferred to y" or the choices "x is chosen over y" and translate the preference talk or choices into a formal structure, a formal translation.
But unlike if then, this translation depends upon us first identifying a body of choices or preferences that appear reasonable.
Then, given certain formal considerations say property alpha and beta in choice theory, we can translate the choices and determine whether they are formally rational.
If they are not, we have two essentially different ways to go: a) the original choice pattern was not reasonable, or b) our concept of formal rationality has to be modified. (Two many of these difficult choices would be a ground to move away from rational choice theory.)
What most economists fail to do is to specify if the alleged failure shows:
a) the translation was not truth functional, and the preference talk lacks certain formal characteristics. Framing examples come to mind here.
b) the translation or model was truth functional, but the irrationality in model shows that we were mistaken about the original choice talk being reasonable. We have now found something new. The money pump arguments comet to mind here.
c) the translation failed, much the same way english users don't perceive themselves to be using material implication.
d) the original choice talk was of reasonable behavior, but the formal considerations have to be changed in order to accommodate this translation. In this context, it is worth noting that most of the examples of context dependent choice fail to be captured by set theory choice theory. If the addition of a changes the relationship between b and c, then the relationship between b and c is not an ordered pair.
Getting an economist to hew to one of these positions would be useful. (Not withstanding, I do like Ariely's experiments because they are fresh - but if someone is predictable in their choices, then they are maximizing something.)

Most people make decisions not based on reality, but based on fear or emotions. That is where the problems lie. If we make decisions based on what is real, then good decisions are made.

Is not the part of the excitement being a human that we are irrational,bit odd,and make decisions with emotions and depending on our mood at the time can be great ideas or really bad-

Very few of us are trained to think properly. Few of us get any psychology and fewer any neuroscience.
For starters, many choke on poor language skills. Parsing errors are ubiquitous. Minimizing ambiguity is both science and art.
Then add a heavy dose of appetizing logical fallacies.
Finally, toss in a wide variety of half-baked heuristics, cognitive biases, and off-label implicit associations and nobody can agree on the basic facts much less digest what they might mean.
In this internet + Google world there is no excuse not to shift more k-12 curriculum towards linguistic and reasoning skills--from facts to fact checking.
Poor Richard
Poor Richard's Almanack 2010