Research on the determinants of subjective well-being (happiness) points to the pervasive importance of interpersonal relationships.  The intrinsic value of these relationships has, with the exception of altruism, been largely ignored in the economics literature. A utility maximising model is presented here which explicitly articulates their benefits – and costs.  It provides an analytical framework for relevant policy.  But relationships with others are also a source of unhappiness.  The model sheds light on possible causes, and it is the unhappiness sometimes caused by relationships which cautions against unconditionally accepting happiness as the welfare criterion.  We therefore argue that the very importance of relationships to happiness requires that utilitarian criteria might be buttressed by the capabilities approach.