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The Austrian theory of relational goods

International Review of Economics volume 57, pages 143–162 (2010)Cite this article

Abstract

In modern rich societies, the traditional positive correlation between income and happiness seems to have disappeared: even though their income keeps rising, people do not declare themselves to be happier. This problem, which is known in literature as the “paradox of happiness”, has been thoroughly studied. One of the possible explanations is based on the observation that an income increase can sometimes entail the destruction of those relational goods on which happiness largely relies: relationships of family, friendship, love and fellowship. This research aims to show how, in the age of Marginalism, the most important attempt at establishing if and in which sense relational goods are economic goods is carried out by the very Austrian economists who led Robbins to write the epistemological statute of modern economic science.

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Notes

  1. Much literature exists regarding economics and happiness. I will mention only some basic works: Frey and Stutzer (2001), Layard (2003, 2005), Bruni and Porta (2007). On economics and interpersonal relations see Gui and Sugden (2005).

  2. The correlation between income and interpersonal relations is a controversial topic. According to Stanca (2009: 841), “better economic condition are generally associated to a better quality of interpersonal relations”.

  3. The authors, moreover, elaborate an economic theory originally devised by Gui (1987, 2002). See also Sacco and Zamagni (2006).

  4. As is well known, this distinction is based on a twofold feature: rivalry in and possibility to exclude from consumption. Private goods are rival and excludable, while public goods are neither rival nor excludable.

  5. The other fundamental characteristics are Identity (of the single subjects involved), Simultaneity (the good is co-produced and co-consumed at the same time by the subjects involved), Emerging Fact (the good emerges inside a relation), Good (it has a value but not a market price). Such a definition of a relational good does not fit the traditional distinction between private and public goods and could at most be defined as anti-rival: see Bruni (2006a: 158–161; 2008: 9–11).

  6. There is much literature on the Austrian School, as well. On Menger and his legacy, I will mention only Caldwell (1990).

  7. In the English translation of Menger’s Principles (Menger 1871 [2004]: 288), the following references can be found: Schäffle (1867), Hermann (1874) and Roscher (1892).

  8. In the Publisher’s Preface to the English translation the following appears: “If the title were transliterated into English, it would be Legal Rights and Relationships from the Viewpoint of the Economics Doctrine of Goods”, see Böhm-Bawerk (1881 [1962]: 39). For a general introduction to the early writings of Böhm-Bawerk see Yagi (1983) and Grillo (2002).

  9. Böhm-Bawerk (1881 [1962]: 71) quotes Schäffle: “He begins his Theorie der ausschliessenden Absatzverhältnisse [Tübingen 1864] with the words: “There are many teachers and not a few students of economics who become astonished and incredulous when they are told in their earliest and very fundamental discussions of economics that two categories of objects which are the object of economic exchange comprise (1) material, concrete things and (2) personal services; but that in addition to these two, and coordinate with them, there exists also that third category of economic goods which Hermann introduced into economic science under the name of ‘relationships’ and which since his day, have maintained the position in which he placed them”.

  10. On Wicksteed see Robbins (1933) and Kirzner (1999). Kirzner (1999: 101–102) wrote: “Philip Wicksteed has, at least doctrinally, been identified with the Austrian tradition. Perhaps for this very reason, however, we should, at the outset of a discussion of the Austrian character of Wicksteed’s work, emphasize that, whatever the strength of Wicksteed’s Austrian doctrinal credentials, he was not a member of the Austrian School in the usual sense. This British contemporary of Menger, Böhm-Bawerk, and Wieser appears to have had no direct contact or correspondence with any of them … The elements in Wicksteed’s work which we shall identify as ‘Austrian’ were, it is well-recognized, the outcome of his own careful elaboration of the insights he discovered in the work of that other British ‘Austrian’, William Stanley Jevons.”.

  11. Here, I accepted the interpretation of Wicksteed’s thought suggested by Bruni (2006b: 113–118).

  12. Regarding Robbins’s Austrian connection, O’Brien (1990: 179–180, original italics) wrote: “The Austrian connection in Robbins’s work is thus important, but it is not exclusive of other influences or completely overwhelming … But if limited, it is nonetheless important. Quite clearly it significantly affected Robbins’s own view of writers other than the Austrians. It was an Austrian perspective which he adopted in synthesizing, in the interwar period, that corpus of economic theory to which he attached such importance. As he read the Austrians’ works, he found in them not only elements which coincided with that he had already learned from Wicksteed but also insights which enabled him to see what was essential to Wicksteed and what could be dispensed with in the building up of an authoritative treatment of microeconomics”. On this topic see now Howson (2004). On Robbins’s thought see Masini (2009); on the reception of Robbins’s Essay see Backhouse and Medema (2009).

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Acknowledgments

I wish to thank two anonymous referees for their invaluable comments on an earlier version of the paper. This work is a development of Magliulo (2008).

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  1. Faculty of Economics, LUSPIO, Via Cristoforo Colombo, 200, 00145, Roma, Italy

    Antonio Magliulo

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Magliulo, A. The Austrian theory of relational goods. Int Rev Econ 57, 143–162 (2010). https://doi.org/10.1007/s12232-010-0100-y

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Keywords

  • Austrian school
  • Relational goods
  • Economics and happiness

JEL Classification

  • B13
  • D60