Moral Hazard and the Mortgage Crisis: A good sounding argument that is really dumb

There is a popular notion that we should do nothing to help out underwater mortgage holders.  The theory being that these people knew what they were doing and have to suffer the consequences of their choices.  This moral hazard argument suggests that if we do anything to help out underwater mortgage holders, then people will act badly in the future, thinking that they would just get bailed out too.

Here are some holes in that argument for the current mortgage crisis:
1.  With more foreclosures, there will be a massive decrease in home values, the whole neighborhood will go downhill.  You will have a lot of people moving back in with their parents or moving in with siblings or friends.  You will also have lots of empty homes.  This is bad since you'll be punishing people who did everything right.

2.  No one in their right minds will have a strategic default (meaning purposeful default).  After a default, a person is shut out of the credit market (no credit cards, no car loans, no mortgages) for 10 years.  After 10 years, they'll be high risk and have to pay far higher interest rates.  Can you imagine how crappy that would be?

3.  With little hope of keeping their homes, homeowners will not take care of repairs nor keep the home in good condition.  Banks know this and they know that they want to keep people in their homes.  The only people who don't give a crap are Mitt Romney, Rick Santelli (the Chicago Merchantile Exchange guy on CNBC), and self-interested speculators (me?).

Only one solution works effectively: principal reduction.  When the farm states were having their own mortgage crisis in the late 1990s, the banks reduced principal on the farmers' mortgages and a greater crisis was averted.  This idea is highly unpopular with powerful, financial interests because it reduces the potential money that they will be paid back.  However, principal reduction increases the chances that the homeowner would be able to afford the mortgage.

Banks should view the current crisis as viewing underwater mortgages as companies in distress.  In these situations, companies and banks would negotiate terms to best increase the odds of the company surviving and paying, at least a portion, of the loans owed.

Party Primaries: A Source of Polarization and a Potential Solution

Ever wonder why everyone is such a nutjob in Congress?  It is because of the party primary system.  Most seats in the House and in the Senate are pretty safe for either the Democratic or the Republican primary.  This usually means the action is at the primary election stage where the parties are trying to pick their nominees. 

Primary elections are low voter turnout where only the most nut-jobish, angry people vote.  For example, as a normal person, I've voted in 5 general elections and 0 primaries.  This is where the most-left leaning and most-right leaning people get their chance to ruin the country.  Usually, to win the nomination, candidates have to say crazy things...like...the Voting Rights Act is unconstitutional...notice all the mega-right wing stuff Mittens has to say.  With all this Tea party nonsense, the real action now is in the primary and not the general election which means that the most extreme candidates are often the candidates for the general election.  Then they become our elected officials are go crazy and think that everything is the end of the world.

Here are some examples of how dumb people are who go crazy in these primary elections.
On the right: There are lots of people who don't think that dollars aren't legal tender...wtf do you want to be paid in? beaver pelts?
On the left: the state attorney general couldn't get rid of the nuclear power plant in our state because there is a federal law allowing that power plant (which pre-empts state action for you non-law people)...therefore, he sucks and we should get rid of him.

The Republicans are getting pretty good at this nonsense.  They selected "witch-lady" Christine O'Donnell over the far more electable Mike Castle for the 2010 DE Senate Race.  They unseated conservative Utah Senator Bob Bennett because he wasn't super mega-conservative enough.  Now they are trying to get rid of Sens. Orrin Hatch and Dick Lugar for not punching Obama in the face or something...  They also lost NY-25 this way...because the second most conservative member of the NY legislature as their congressional nominee was not conservative enough.  So...pretty much to win a Republican primary...you have to think that women have to stay virgins until marriage, poor people should just die, immigrants should get the fuck out, and the world is flat.  (I'm exaggerating...or am I?)

The Democrats are not as good at it so far, but I believe they'll get there.  ObamaGirl is now out of love with Obama because he isn't socialist enough or something.  Here is a Dem example of trying to do this ideological purity BS...in IL-10 an upper middle class 60%+ Obama District, a 25-year-old guy whose only experience is working for MoveOn.org (a nutjob left-wing organization) ran against a rich, pragmatic business consultant in the Democratic primary.  The 25-year  old lost! showing that sanity is not dead in the Democratic Party.  To win a Democratic primary you have to think that all corporations are evil, all brown people are good and decent (most are but some aren't), everyone is being victimized all the time, all corporations, banks, and rich people are super evil.

Remember when I said the Dems are not as good at it...I lied...the most left-wing Dems voted for fucking Ralph Nader in 2000, handing the election to Bush.  Al Gore would've paid off the deficit, protected the environment, not had a wasteful Iraq War...you idiots...(as you can see, I'm a huge Al Gore fan)  Gore lost in Florida by about 537 votes.  Nader won 97k votes in Florida...

We're totally fucked.

The potential solution is the "top-2 primary" which throws all the candidates, regardless of party onto the same ballot, with the top 2 vote-getters moving on to the general election.  Theoretically, this gives more moderate candidates a chance since the whole, wide electorate gets the chance to vote for any of the candidates.

Here are the pitfalls of the top-2 primary system:
1. It destroys 3rd parties from getting attention.  This might not be a bad thing (see my Al Gore example).  Also, its not like 3rd parties were getting attention anyways.
2. Theoretically, this could happen...lets say that there is a district that is 60% Dem 40% GOP.  The candidates could split the vote in the following way.
R1-20%
R2-20%
D1-10%
D2-10%
D3-10%
D4-10%
D5-10%
D6-10%
In this situation, the two Republicans would move on to the general election even though its a 60% Dem district.  This is only theoretical, I have yet to find an example where this actually happened.

Obama v. Romney: It will be close, but not that close

Despite Mitt's new aura of inevitability, his candidacy has been remarkably inept.  He is having a lot of trouble beating horrendous rivals.  His rivals are all super-flawed and have no money.  Let's examine his rivals:

1.  Rick Santorum: This guy is really dumb and runs a pretty amateur campaign.  He's had trouble qualifying for ballots and making the most of his opportunities to get delegates.  This shows incredibly bad oversight by his legal team and general lack of any sort of campaign organization.  The guy talks about porn, speaking English, and contraception.  Those are losing issues. First off, pretty much everyone is, at least secretly, pro-porn and pro-contraception.  Secondly, the vast majority of voters speak English and have no problems with the language.  Watching this guy's campaign is like watching Tim Tebow throw the ball.  Sometimes its surprisingly impressive, most of the time you're left thinking...WTF???

2.  Newt Gingrich:  This guy has done a lot of cheating on his spouses.  He thinks that his current wife, Callista, will help his image out.  However, Callista was "the other woman" for 6 years.  Do you think married women are going to trust someone who was be the woman that a husband cheated with for 6 years?  Secondly, this guy has a lot of issues and has only one donor...Sheldon Adelson.

3.  Ron Paul:  The dude doesn't talk about popular issues.  While his point of view has intellectual consistency, a value most of us crave, they are an example of logic gone wild.  I mean, who is against Secret Service protection.

You might say...but Mitt is a moderate who is having trouble connecting with the increasingly conservative GOP electorate.  However, Mitt was easily considered a conservative in 2008.  Don't believe me, take a look at all of the county-based election maps.  John McCain took all of the moderate counties while Mitt and Mike Huckabee split the conservative ones.  For example, 2008 Mitt Romney won all of those conservative counties in Florida that 2012 Newt Gingrich won.  Mitt has been the conservative candidate before and has no one to blame but his own messaging team this time around for his troubles with very conservative voters.  Mitt is not having trouble with conservatives because of his "moderate" views, it's because of his bad image control in a primary where he's outspending all of his rivals combined by many multiples.

The fact that Mitt is having so much trouble dispatching this band of misfits is troubling at best for the Romney campaign.

Here are some of the other reasons Romney will have trouble with Obama (these are purely process-oriented reasons, as opposed to substance-based reasons):
1. He lacks a wide fundraising base.  Only 10% of his money has come from donors donating less than $200 (compared with 40%+ for Obama, Santorum, Gingrich, and Paul).  There are only so many wealthy people out there wanted to cut Romney's SuperPAC a check for $50k.  His campaign and his SuperPAC have also been cash-flow negative for the past 2 months.
2.  People "like" Mitt Romney (including both of my lovely office mates...at my work...they are both great people...I swear).  But no one "loves" Mitt.  Despite the difficulties of his first term, there are a lot of people who "love" Obama.  That love manifests itself in a lot of ways which help campaigns win close elections such as campaign volunteering, door to door canvassing, driving old ladies to the polling place, phone banking, and voter turnout in general.
3.  There is a lot of doubt over Romney's sincerity.  He seems to have changed his views on about every divisive issue and the dog story isn't helping.
4.  Mitt is like a crappy NFL team like the Cleveland Browns playing against Div. III college football programs.  Obama is more like the Denver Broncos with Peyton Manning.  Mitt having trouble with such weak competition doesn't bode well for the main event.

A Curious Post About Capitalism

Recently, I read a very fascinating blog post about capitalism.  This author broke down the functions of capitalism as follows:

• Capital formation:In capital formation the firm consumes financial assets (usually cash) and builds real assets that it will later use for production or extraction. Capital formation thus takes two forms:
• Productive capital formation, such as technical innovation, the building of customer relationships and goodwill, channels to market, facilities or machinery, organizational and human capital. (i.e. computer programmers, fashion design, genetic research) 
• Extractive capital formation, such as the acquisition of monopoly licenses or exclusivities, financial muscle, commodity stocks, control over suppliers or distributors, land, and all IP assets. (i.e. investment banking, finance, patent attorneys, government corruption)
  
• Production: Production is what an industrial, agricultural, or service firm does. Resources come in, labor and and devices are applied, and goods or services come out. The goal of production is to sell the goods or services at a profit, while minimizing the share paid to suppliers and labor, and the running cost of devices. (i.e. factory workers, fruit pickers, fishermen)
• Extraction: Extraction is what a landlord, bank, media company, utility, mining company, or retailer does. These firms have a productive function, but their dominant mode of business is to extract rents from assets that they own, while rationing those assets so as to command the maximum price.

All three functions are important for a functional capitalistic company.   Each firm generally has a function of each.  Without capital formation, there wouldn't be any production.  Without some kind of production, there would be nothing to exchange for extraction.  Without extraction, there would be no cash for capital formation.

Capital formation is important to generate assets to get profits, either through Production or Extraction.  Think of this step as setting up the system for producing an in-demand good or service.  The best jobs (or at least the best paying ones) in capitalism are usually in capital formation. These jobs tend to present a lot of variation and intellectual vigor which many of us want. 

Productive capital formation is about R&D, innovation, bright ideas, making what previously didn’t exist or wasn’t possible. Productive capital is seen as a beacon of hope and progress for humanity, and great store is set by it wittingly or unwittingly.  The best economies should have a society's smartest citizens in productive capital formation.  America has so many smart people working in these capacities and continuously attracts smart immigrants to instill vigor into our economy.  Generally, politicians refer to productive capital formation when they speak about how great capitalism is.  This is the positive story of capitalism since productive capital formation leads to superior goods and services, which can lead to a dominant market position (ex: Apple and the iPod). 

Extraction capital formation is the use of law, finance, asymmetric bargaining position, and government corruption to gain an advantage over the rest of the market.  This is the ugly sister of productive capital formation.  All the obscene money is made in extractive capital formation (aka Wall Street bonuses for guys who just push money around).  Don't get me wrong, as individuals, we would all want to be on the dominant side of extraction capital formation.  Everyone (every company) professes love of openness and competition, but seeks extractive rights and market distortion.  A good example of this is the American Airlines government-provided windfall in mid to late 20th century.  American Airlines, whose main hub is the Dallas-Fort Worth International Airport, got the federal government to ban a bunch of flights from Love Airport, where their weaker competitor Southwest Airlines had operations.  Another example is...musician=productive capital formation; record label that sues copyright infringers=extraction capital formation.  Let me emphasize that while some extraction capital formation practices are evil, many are not.  Extraction capital formation is a necessary step in functional capitalism.

Production is boring.  When you think of production...think of being in an assembly line or picking vegetables for 12 hours a day or doing people's nails for a job.  It is generally very low paying and not that much fun.  Marxist schools of thought have yielded an excellent analysis of production, almost 200 years ago. Human labor is alienated and subjugated to competitively-driven cost minimization. The root cause is the separation of personal, inner productive capital from labor as the artisan economy gave way to the industrial. Their solution has been to re-apportion the means of production to the people. But here’s the problem: Production is boring. Everyone feels for the proletariat, but no-one wants to be the proletariat (cause it really sucks). 

Communist attempts to regulate the relations of production, despite good intentions, have been on the whole backward – denying or fighting the separation of production from productive capital, the reduced need for and correspondingly fading status of labor, and the creative destruction needed to move to more modern forms of economy better fitting the aspirations and wishes of people as both consumers and professionals. Trade unions are a case in point. A union holds an extractive right, a quasi-formal monopoly over a specific domain of production. As such, it conflicts with efficiency. 

Left wing politics should not advocate for this kind of backwards thinking.  I will definitely be an evil, conservative Republican if the Democrats are ever this stupid.  Current left-wing ideology focuses on how we should give production a bigger piece of the pie.  This is a super losing argument.  I am thinking about being evil, conservative Republican since a lot of Democrats focus on this.  In lieu of this retardedness, the Left should advocate for workers and the poor to own a piece of capital.  This is will be least distortive to the economy and give some semblance of a rising tide lifting all boats.

You might also be asking, why do we care so much about manufacturing if it just provides boring jobs that no one wants to do?  Well, cause its relatively low skill and doesn't require much education.  It provides jobs to the masses, who are otherwise unqualified to do the cool capital formation jobs.

Why Good People Disagree on Politics and Religion?

People can't even agree on the facts and are seemingly super divided.  Every time politics comes up, people generally become further entrenched in their own views.  It's important to note both liberals and conservatives are generally good people (or at least mostly not evil) and not Hitler.  Most people are not crazy.  Unfortunately, the political class on both sides on the national and state levels fully realize that playing polarizing "us versus them" politics is very profitable.  Therefore, there is very little incentive to change the current way of doing business (aka good v. evil, let's take every opportunity to demonize and humiliate the other side).  Since people can usually be herded like sheep by the higher ups, the behavior of the political class is very influential on the masses.

One way of thinking about how good people can disagree on Politics and Religion is to note that there are 2 competing narratives that good, reasonable people can generally believe in.

Market Test for the Importance of the Individual Mandate

The U.S. Supreme Court is set to rule soon on the constitutionality of the individual mandate for health insurance from the Affordable Care Act.  The act is part of the effort to get everyone on health insurance (including 29% of Texas...that's a really high percentage...how embarrassing for a rich state).  The individual mandate is a pro-health insurance provision that encourages all people to basically pay into the health insurance system so that the system can insurance more sickly people without too much of a hit to profit margins.  Those who do not have health insurance have to pay a small tax penalty.

How will you know if the individual mandate is important to health insurance companies?

Financial Investment: A Interesting Idea if the GOP wins

If the GOP wins in 2012, look for weakening of the Affordable Care Act, dismantling of Medicare as we know it, and decreased funding for Medicaid.  So how can you take advantage of these sucker punches to people who aren't me (aka the old, sickly, and poor)?

Weakening of the Affordable Care Act

• Go long on health insurance stocks WellPoint (WLP), Coventry Health Care (CVH), UnitedHealth Group (UNH), Aetna (AET), CIGNA (CI) and Health Net (HNT)

Weakening Medicare (go long on providers of Medicare Advantage plans)

• These are Humana (HUM), HealthSpring (HS), Universal American (UAM) and WellCare (WCG)

Weakening Medicaid

•  Those who provide Medicaid will lose out on business, like AMERIGROUP (AGP)

Disclaimer:  These are just ideas and could lose lots of money.

1936's Mitt Romney

In 1936, President Franklin Roosevelt faced his first reelection. Roosevelt began the year sliding in the polls, facing an increasingly hostile media, a still sluggish economy, and the big business-friendly Supreme Court had recently knocked down an array of New Deal legislative accomplishments, particularly the National Recovery Administration. The Republicans had an excellent chance to retake the White House.

The chief dividing issue at the time was the New Deal.  The Democrats supported it in general; the Republicans disliked it in general.  Instead of nominating someone on the fringe ideologically as their 1936 Presidential nominee, the Republicans picked a "moderate who sought simply to make the message that he would run the New Deal in a more efficient manner.

That man was Alf Landon, the 1936 version of Mitt Romney.

The Myth of the Decline of American Manufacturing

The current narrative is that (1) America is declining in manufacturing, (2) all the factories are moving overseas, (3) there are going to be very few manufacturing jobs in the future, and (4) America is not going to make any stuff anymore.

This narrative is simply not true or at least mostly not true (item 3 might be true).  The economic output from American manufacturing is greater than ever (mostly).  American GDP from manufacturing is growing and American manufacturing production is still #1, way ahead of China.

Here are some things that America makes:

How to be a Prosperous Nation with Energy

Step 1: Determine where your strengths are (i.e. natural resources, human capital).

Step 2: Translate those strengths to systems and processes that the world can't live without.

Step 3: Get the rest of the world to adopt said systems.

Here's an illustrative example that turns into a babbling, true story.

Why Eliminating the Minimum Wage is a Stupid Idea

This is what the mainstream, anti-minimum wage economic reasoning is...

This image implies that there will be more jobs available at a lower wage.  The unemployment rate is 8+% so to lower that we need to get rid of the minimum wage right?

Obamneycare: The Market Test for Truth

Applying the Market Test to Political Arguments to see if they are true or pre-text.

Argument #1: Obamneycare is going to ration doctor pay and significantly bring it down.  Is this true?
Look at the current pay for doctors in Massachusetts.  Has it declined a lot in relation to the median salary since 2004?  Is doctor pay in a downward trend?  Is doctor pay lower relatively to doctor pay in other states?  The answer to all of these questions is no.  Myth Debunked!

Argument #2: Obamneycare is going to ruin the health care industry and make it worse on everybody so that they'll be a complete government take over of health care.  Is this true?
How are the stocks doing for health insurance companies like Aetna and hospital stocks like Health Management Associations going?  Well, they are not collapsing.  In fact, no articles are usually written about their performance post-Obamacare including those on right-wing blogs.  Myth Debunked!

Disclaimer:  Now, I don't know much about Obamneycare, it could ruin the world?...unlikely.  As a normal person, I haven't read the law and am not planning on doing so. 

It is ironic that “libertarian scholars [fail] to enthusiastically embrace a couple billionaires’ putative property rights” over the Cato Institute

Cato Scholar Julian Sanchez argues that there is nothing ironic or hypocritical about members of the Cato Institute manning the barricades against Charles and David Kochs' lawsuit to obtain a controlling stake in the institution (Kochs' complaint here). He is wrong; it is highly hypocritical.

On the standard libertarian view, property rights are created through productive effort and exchanged through voluntary transactions. They are pre-legal, moral rights and not violating them is a big part of the libertarian prime directive (so big that they cannot even be violated to provide the destitute with “food, shelter, health care, employment”).

The Kochs, Cato President Ed Crane, and a few others got together in the 1970s, created the Cato Institute, divided property rights in it equally among the different founders, and provided that "[n]o stockholder of the Corporation shall have the right or power to pledge, hypothecate, sell or otherwise dispose of, directly or indirectly, all or any part of his shares of stock without first offering to sell such shares as he desires to dispose of to the Corporation for a price equivalent to the price paid by such shareholder for such shares." Cato Chairman Bob Levy effectively concedes that, regardless of its current legal effect under Kansas corporate law, this agreement was intended and understood to prohibit the disposition of shares by devise (including William Niskanen's shares that are presently at issue):

Levy explains to National Review Online that “the way forward is to abandon this shareholder structure, substitute a structure where the institute is controlled by members, the way just about every non-profit in the world is, and those members would be the board of directors themselves, so that we have a self-perpetuating board.”

Abandoning the shareholder structure is the way forward for Levy because the current structure doesn’t enable a self-perpetuating board (including a board that self-perpetuates by decedent members’ willing their shares away).

But despite the fact that the Niskanen shares are not to be devised – should have been tendered to the Corporation for repurchase (a collateral consequence of which would have been the Kochs’ obtaining a controlling stake in Cato) – Crane, with the apparent approval of his scholars, has vowed to use Kansas law to try to destroy the scheme of property rights upon which Cato’s founders agreed. Maybe he has a sufficiently plausible legal argument (we can punt that one to the “experts in Kansas corporate law” to whom Sanchez glibly adverts), but so what? The law has been known to disrespect property rights in the past. And given that property rights have lexical priority over act-consequentialist considerations in libertarian morality, it is hypocritical for libertarians to focus all of their energies on lamenting, and fighting in the press, the Kochs’ “takeover attempt” without a word about what, by libertarian lights, is a violation of the Kochs’ moral rights.

Where’s the rousing defense of the right to make an unwise decision? Where’s the reminder that the ends don’t justify the means? That rights are to be taken seriously? That legality does not excuse wrongdoing? When the exercise of those rights hits too close to where libertarians earn their daily bread, nowhere.

A Destructive Human Desire

This problem is our constant desire to feel dominance over others.  This feeling that all of us have can explain so many of the world's problems: (1) hazing, (2) rape, (3) condescending moral arguments, (4) war, (5) racism, (6) bigotry, (7) "mean girls", (8) bullying, (9) Columbia students thinking that they are so much smarter than Barnard students (and then getting mad that the Barnard Diploma also says "Columbia" on it), (10) a desire to compare penis sizes, and (11) a lot of other problems. 

This desire is connected to the need to feel some sort of superiority over others. For those Maslow fans out there, this desire stems from our need to have esteem among our peers and also from our need to have a sense of achievement.

These related feelings are natural and should not be completely condemned.  However, we need to channel those feelings in ways that do not harm and disrespect others.

Here are some potential solutions:

Which View of Marriage Do You Have? Ross' or Rachel's

In an episode of Friends, when Ross discovers that Rachel is pregnant with his baby.  In an excited haze, Ross proposes marriage because children should be raised with 2 married parents.  Rachel, however, refuses and says that marriage is something that people do when they are in love, not when they have a surprise pregnancy.

So what's the main reason for marriage (because these two views are not mutually exclusive)?
The Rachel View:  As an expression of love.  This view of marriage is very friendly towards gay marriage.  Did some left-wing group pay off the Friends' writers to put the Rachel view on the air?

The Ross View:  As a way to provide children with a stable upbringing.  This view is less friendly towards gay marriage.  Did some social conservative group pay off the Friends' writers to put the Ross view on the air?

The Perverse Incentives of Impending Cap and Trade Legislation

Cap and Trade legislation has often been proposed as a way to curb carbon emissions and slow down climate change.  However, this system of handing out "pollution credits" and allowing the sale of these credits on the open market has perverse incentives for the current market.

Congress: The New Normal

Under the new normal of hyper-partisanship and pro-nut job politics, there lies a hope for the future.  Right now a small group of lawmakers are trying to stop this nation from committing financial suicide. YAY!  Maybe we're not totally doomed?

The only reason why they are even allowed to negotiate without outside groups going bat-shit crazy is because of secrecy.

There you go folks, the new way to get stuff is secrecy!   Some might decry the end of open democracy.  Open democracy also means the most passionate (nut-jobish) people/entities have the most influence since they are the ones who care the most.  Yikes...

A Curious Story on the Subway

During my subway ride home the other day, a couple of ladies were passing out fliers.  The fliers decry how hundreds of thousands of unionized postal workers will likely lose their jobs.  The two women went on a rant about the destruction of good wage jobs and aimed the blame at "privatization" and Wall Street (the same Wall Street that had profits drop by a lot).  The United States Postal Service is losing billions of dollars.  With the increase of email, traditional mail usage has plummeted.  The bottom line is that those postal worker jobs are just not needed any more for our economy.  Keeping those jobs would be extremely inefficient and a poor use of resources, especially government money.

Financial Investment: Stock Picking-the first thing you should do

Read Annual Reports...

What are annual reports?
They are the 10-K filings that every public company in the United States has to file with the Securities and Exchange Commission (SEC). 

Where can I find annual reports?
Here, they are available online for free.  Courtesy of your tax dollars.  There are sites that offer this info for a fee, don't encourage that economic behavior.

Why should I read annual reports?
It's what research analysts do.  It's what Warren Buffett does. It's what all investment professionals do. It gives you all the important info about the business.  If you read the annual reports first without anything else, you will help yourself make a non-biased valuation.

What should I look for when I'm reading?

The Truth of Maslow's Hierarchy of Needs

Maslow's hierarchy of needs is quite possibly the most brilliant theory on human behavior ever.  The human mind and brain are complex and have parallel processes running at the same time, so many different motivations from different levels of Maslow's pyramid usually occur at the same time. Maslow was clear about speaking of these levels and their satisfaction in terms such as "relative" and "general" and "primarily", and says that the human organism is "dominated" by a certain need.  The dominant need is the highest (most complex) level of need that has not been met yet.

Here is summary of the different layers of needs: from most basic to most complex
1.  Physiological Needs: Food, Shelter, Air, Sleep
Without these, we can't live...let alone think about happiness.