Social Exchange Theory Social exchange theory is a social psychological and sociological perspective that explains social change

and stability as a process of negotiated exchanges between parties. Social exchange theory posits that human relationships are formed by the use of a subjective cost-benefit analysis and the comparison of alternatives. The theory has roots in economics, psychology and sociology. Social exchange theory features many of the main assumptions found in rational choice theory and structuralism. I. Concepts and Assumptions of Social Exchange Theory Human Behavior/Social Interaction as Exchange Exchange theory is based on the premise that human behavior or social interaction is an exchange of activity, tangible and intangible (Homans, 1961, p. 212-3), particularly of rewards and costs (Homans 1961, p. 317-8). It treats the exchange of benefits, notably giving others something more valuable to them than is costly to the giver, and vice versa (Homans, 1961, pp. 61-63), as the underlying basis or open secret of human behavior (Homans, 1961, p. 317) and so a phenomenon permeating all social life (Coleman, 1990, p. 37). Not only is the market permeated by exchange but also the non-economic realm--the social relations situated between extremes of intimacy, self-interest or cost-benefit calculation and disinterested, expressive behavior (Blau, 1964, pp. 88-91). Social exchange is composed of actions of purposive actors that presuppose constellations of their interests and resources. The complex of interdependent exchange processes constitutes the market functioning within a definite social and institutional structure, though admittedly the latter has not been systematically examined within rational choice theory. Since these processes are assumed to be governed by reciprocal relationsviz. exchange is defined as social interaction characterized by reciprocal stimuli they would not continue in the longrun if reciprocity were violated. The concept of exchange ratio or balance-imbalance, leading to the concepts of power, dependence, and cohesion, is implied in the attribute of reciprocal reinforcements (Emerson, 1969, pp. 387-9). In consequence, exchange theory examines the processes establishing and sustaining reciprocity in social relations, or the mutual gratifications between individuals. The basic assumption of exchange theory is that individuals establish and continue social relations on the basis of their expectations that such relations will be mutually advantageous. The initial impetus for social interaction is provided by the exchange of benefits, intrinsic and extrinsic, independently of normative obligations (Blau, 1994, pp. 152-6). An overview One way of analyzing social interaction is through the social exchange theory. This model interprets society as a series of interactions that are based on estimates of rewards and punishments. According to this view, our interactions are determined by the rewards or punishments that we receive from others and all human relationships are formed by the use of a subjective cost-benefit analysis. The theory has its roots in economics as well as sociology and psychology. Central to the social exchange theory is the idea that an interaction that elicits approval from another person is more likely to be repeated than an interaction that elicits disapproval. We can thus predict whether a particular interaction will be repeated by calculating the degree of reward (approval) or punishment (disapproval) resulting from the interaction. If the reward for an interaction exceeds the punishment, then the interaction is likely to occur or continue.

The basic formula for predicting the behavior for any individual in any situation is: Behavior (profits) = Rewards of interaction costs of interaction. Rewards can come in many forms. Some examples include: Recognition, money, tangible things such as gifts, or subtle everyday gestures such as a smile, nod, or pat on the back. Punishments also come in many forms, from extremes like public humiliation, beating, or execution, to subtle gestures like a raised eyebrow or a frown. Example A simple example of social exchange theory can be seen in the interaction of asking someone out on a date. If the person says yes, you have gained a reward and are likely to repeat the interaction by asking that person out again or asking someone else out. On the other hand, if you ask someone out on a date and they reply with No way! then you have received a punishment that w ill probably cause you to shy away from repeating this type of interaction in the future. Basic Assumptions of Social Exchange Theory People who are involved in the interaction are rationally seeking to maximize their profits. Most gratification among humans comes from others. People have access to information about social, economic, and psychological aspects of their interactions that allows them to consider alternative, more profitable situations relative to their present situation. People are goal oriented in a freely competitive system. Exchange operates within cultural norms. Social credit is preferred over social indebtedness. The more deprived the individual feels in terms of an act, the more the person will assign value to it. People are rational and calculate the best possible means to compete in rewarding situations. The same is true of punishment avoidance situations.

Applications of Social Exchange Theory Social Exchange Theory has its roots in a variety of research topics. Among them are: Mate selection research, marital stability research, marital satisfaction research, family violence research, parenting research, role differentiation research, work relationships research, and family relationships research.
References

Witt, D.D. (2011). Social Exchange Theory and Developmental Theories. http://www3.uakron.edu/witt/fc/fcnote5b.htm

Andersen, M.L and Taylor, H.F. (2009). Sociology: The Essentials. Belmont, CA: Thomson Wadsworth.

Strengths Most people can understand the general assumptions Very parsimonious The ability of exchange theory to explain many family issues Criticisms Assumes humans act rationally when deciding on an exchange Some issues are difficult to explain effectively utilizing exchange theory such as altruism Valuing self-interest A tendency to place ones own bias on the perception of the situation. Very difficult not to place our own bias, such as accepting anothers view of what a resource, cost or reward is. Generally limited to dyadic relationships

The social exchange theory, also called the communication theory of social exchange, suggests that human beings make social decisions based on perceived costs and benefits. This hypothesis asserts that people evaluate all social relationships to determine the benefits they will get out of them. It also suggests that someone will typically leave a relationship if he or she perceives that the effort, or cost, of it outweighs any perceived advantages. This premise of social psychology is rooted in economics, rational choice theory, and structuralism. The theory uses economic terms such as benefit, gain, cost, and payment to describe social situations. According to this supposition, people consciously and unconsciously evaluate every social situation in terms of what they will have to put into it, and relate this to the benefits they think they may get out of it. The greater the potential benefit, the greater the personal investment an individual may make in a relationship. People make these decisions, according to the theory, based on their individual satisfaction level within the relationship. Individuals typically have a high level of happiness if they perceive that they are receiving more than they are giving. If, on the other hand, individuals feel that they are giving more than they are receiving, they may decide that the connection is not fulfilling their needs. Whether a person ends a relationship that he or she feels is not worth the social investment often depends on the options he or she thinks are available. Individuals who think that they could fare better in other relationships are more likely to leave such high-cost social situations. If a person feels that there are no better options than the costly relationship, he or she is more likely to stay in the situation. The social exchange theory is considered by many psychologists to be highly individualistic, which means that it assumes that the individual assesses all human social interactions based on his or her personal gain. This supposition denies the existence of true altruism, and suggests that all decisions are made from a self-serving motivation, even generosity. According to the theory, people will only be generous if they expect some personal benefit to come to them because of it. Examples of personal gain from self sacrifice can include a show of gratitude from the recipient or the approval of the donors peer group. This idea emphasizes the antic ipated return for such good deeds, also called reciprocity, as expressed in the phrase, Ill scratch your back, and youll scratch

mine.