Every few months, a viral tweet or blog post resurfaces claiming that the Austrian subjective theory of value is nothing more than “hippie relativism” or an “empty tautology.” The latest version, complete with a cartoon of Marx, Mises, and Hayek confusedly staring at a box labeled “VALUE?,” makes three core accusations:
- Austrians deny any objective or material substrate for value.
- Their theory secretly reduces to “capital creates value” while pretending otherwise.
- Subjective value is just postmodern “whatever anyone feels.”
All three misunderstand the Austrian position. Here is why.
1. Subjective value has a perfectly clear ontological foundation
For Carl Menger and Ludwig von Mises, value is not a floating mental whim. It is the significance that an acting person attaches to a scarce good in the pursuit of real ends. The foundation is the human actor, situated in a world of hunger, cold, risk, uncertainty, and finite resources, assigning importance to goods based on their causal powers.
Preferences exist in the mind, but they are not arbitrary. They are constrained and shaped by objective features of the world. No amount of subjective desire can let you quench your thirst with sand. Goods have real physical properties and causal capacities, and those properties limit what can be valued as a means to an end.
Subjective value, in the Austrian sense, is therefore not a denial of reality. It is the integration of human purposes with the objective structure of scarcity. Far from being ontologically empty, it is one of the most realist theories of value ever proposed in economics.
2. The “mud-pie argument” isn’t a gotcha — it’s the point
Critics often invoke Bastiat’s example of a child making mud pies that no one wants. From this, they claim that because labor alone does not create value, Austrians must secretly hold a “capital creates value” theory.
This gets things exactly backwards.
The Austrian claim is that neither labor nor capital nor land creates value on its own. These are inputs. Necessary, yes. Sufficient, no. What actually creates value is the consumer’s willingness to trade for the final good. Value is imputed backward from consumer valuations to the factors that made those goods possible.
That is the opposite of a capital-centric value theory. It is a radically consumer-sovereign one.
3. “Relativistic” is a rhetorical smear, not an argument
Calling subjective value “relativistic” suggests it’s arbitrary, nihilistic, or postmodern. But Austrian value is not a mood or preference poll, it is revealed in action under scarcity.
When you choose coffee over tea, you demonstrate that you value coffee more at that margin. When millions of individuals make such tradeoffs, prices emerge as objective, intersubjective signals.
Hayek emphasized that prices are neither purely subjective nor imposed from above. They are spontaneous orders, stable, communicative structures that condense dispersed knowledge into something usable.
That is not relativism. It is coordination.
4. The labor theory of value is the one with the unresolved problems
Marx claimed that value is determined by socially necessary labor time. But empirical prices do not follow labor ratios. This discrepancy led to the infamous transformation problem, a century-and-a-half struggle to reconcile labor-values with real-world prices.
Austrian value theory avoids this issue because it does not require a metaphysical “substance” of value to transform. Prices are what emerge from marginal valuations in the moment. No algebraic bridge required.
Conclusion: The Austrian theory is not empty, it is human
The cartoon of puzzled economists might be funny, but it creates a false symmetry. Marx offered a positive theory: value = abstract labor. The Austrians also offer a positive theory: value = the importance an acting individual assigns to a scarce good for achieving his ends.
You may dislike this answer. But it is not “ontologically empty.” It is grounded in the real conditions of human action: purpose, scarcity, and the causal properties of goods.
The subjective theory of value does not deny reality.
It starts from it.
Because its ontology is not abstract labor time or metaphysical substance. Its ontology is the human being who acts.
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