What is good or bad for a human being is identified, basically, by the same method. We identify the requirements of man's survival, by observing facts about man's biological nature and about the characteristic actions man needs to take to sustain his life. Some of the requirements of man's survival are obvious; others may only be identified by extensive study, observation and thinking.
The requirements of man's survival include the needs of maintaining his physical health. If such requirements are not fulfilled, this will not be immediately fatal; however, it will put one's body in a damaged state, which will make death from injury or illness more likely in the long run. Generally, the connection of physical health to survival is non-controversial, and is obvious to most people.
The central non-obvious fact about man's means of survival is one which Rand has fully identified for the first time: man's central means of survival is reason. This identification has crucial consequences for ethics. It is the basis of Rand's view of rationality as the central virtue. Further, since reason is man's means of survival, anything which helps to maintain man's rational faculty is needed for survival. An entire new class of requirements for man's life is thus opened: psychological requirements.
Rand, of course, was not the first to realize that man's psychological well-being has requirements; but she was the first to connect psychological needs to survival. These psychological requirements are the ones which neo-Aristotelians find the hardest to reconcile with survival as the standard, and often use to argue that some other standard --- the standard of "the good life" --- must be used. On Rand's view, however, such needs can be proven to be necessary for survival; not by demonstrating a direct causal connection, but --- analogously to understanding the role of a cooling system in an automobile --- by demonstrating their role in maintaining the proper operation of one specific faculty --- reason --- which, in turn, is needed for survival.
Contemporary medical knowledge about stress-related diseases, and about the effects of one's psychological state on recovery from illness, provides further confirmation of the relation of psychological requirements to survival. It is now known that man's psychological well-being is crucial for his physical health. This medical evidence sheds interesting new light on the role of such requirements in survival, but Rand's argument does not depend on it; Rand connects these requirements to survival through their role in maintaining man's reason.
Because of the centrality of reason to the requirements of man's life, and because of the many requirements needed for its proper maintenance, I think the most essential division of the requirements of man's survival is into two categories: existential requirements --- requirements which directly serve man's physical survival; and psychological requirements --- requirements which serve man's survival by maintaining the functioning of his rational faculty. Some requirements belong purely to one of these categories, while others have elements of both.
In addition to reason, Rand identified two central values for man: purpose and self-esteem. Purpose has a direct, existential role in survival; it is the commitment to using one's reason for achieving the goals that would help one's survival. In addition, purpose also has a psychological element. For man's rational faculty to function properly, it requires a purpose; without such a purpose, man can gradually lose the ability and motivation to fully focus his mind, threatening his success in dealing with future problems. This means that purpose remains necessary for survival, even in those cases in which its existential role in survival does not apply (for example, Rand's view of purpose implies that if a person has a job which does not challenge his abilities, even if it pays enough to provide for his economic needs, it would be self-destructive for him to remain in that job and not find any more challenging purpose on which to direct his mind).
A corollary of the need for purpose is the need for forming values. Purpose, if it is to guide one's actions and fulfill its existential and psychological roles, must not be abstract; it can't consist of general ideas like "I should do what I need to survive", or "I should be productive"; it has to consist of specific values --- central values relating to one's productive activity, as well as values in all other areas of life --- which guide one's concrete, day-to-day actions. The existential role of purpose implies that such values should be ones that objectively contribute to survival. The psychological role of purpose implies that such values --- or at least the most central of them --- should be held strongly and passionately, and experienced by the person as extremely important to him.
Self-esteem, in contrast, is a purely psychological requirement. "Self-esteem, as his inviolate certainty that one's mind is competent to think and one's person is worthy of happiness, which means: is worthy of living" [8]. Such certainty has no direct, existential role in survival, and it is tempting to conclude that it has no role in survival at all, and should be valued, instead, as an important aspect of the good life. Rand, however, did regard self-esteem as necessary for survival, through its role in maintaining one's motivation to continuously use one's reason.
The need to act on principles is, again, both an existential and a psychological requirement. Existentially, principles are the cognitive equivalent of concepts; principles are the means by which a person holds in his mind his entire range of knowledge about the requirements of his life and the means of achieving them [9]. In addition, principles also have a crucial psychological role in man's life. Self-esteem requires a standard for evaluating one's own actions, abilities and character; "To live requires a sense of self-value, but man, who has no automatic values, has no automatic sense of self-esteem and must earn it by shaping his soul in the image of his moral ideal" [10]. Survival is much too abstract a standard to apply directly. Moral principles provide more concrete standards, which can be applied by a person in evaluating himself, and are, therefore, a precondition for self-esteem.
Happiness is another central psychological requirement. Rand defines happiness as "a state of non-contradictory joy"; it is a long-range emotional state, which consists of the awareness that one is consistently, in the long run, achieving one's values. Happiness is therefore not a separate goal; one is acting for it whenever one is acting for any of one's values. Its relation to the concepts of survival and flourishing can be summarized as: happiness is the internal awareness of that which is, externally, flourishing, and which leads to survival. At the same time, happiness is itself a requirement for man's survival, like self-esteem, in maintaining one's motivation to use one's reason.
Another psychological requirement for man, which Rand has identified, is the need to observe objective, concrete instances of one's abstract values. This need explains the role of art in man's life, and is also central to understanding man's need for interpersonal relationships.
In understanding these, and other, requirements for survival --- and, consequently, for the good life --- the method is basically the same. Once we have identified the basic faculties which man needs to sustain his life, we observe what is needed to maintain these faculties; and this provides the evidence for demonstrating what is a value by the standard of survival. This is the method for establishing the Objectivist virtues, and all other valid moral values.