What theory claims that society is composed of ever present interactions among individuals who attempt to maximize rewards while minimizing costs?

We’re taught to weigh pros and cons. In some cases, the words “pro” and “con” may be swapped out for “risk” and “reward.” While this practice typically contributes to whether one pursues something material, the sociological concept known as social exchange theory applies the same principles to person-to-person interaction in order to better understand relationship dynamics. But how exactly does this theory work?

History and Definition of the Theory

The genesis of social exchange theory goes back to 1958, when American sociologist George Homans published an article entitled “Social Behavior as Exchange.” Homans devised a framework built on a combination of behaviorism and basic economics. In the immediate years that followed, other studies expanded the parameters of Homans’ fundamental concepts.

Social exchange theory is a concept based on the notion that a relationship between two people is created through a process of cost-benefit analysis. In other words, it’s a metric designed to determine the effort poured in by an individual in a person-to-person relationship. The measurement of the pluses and minuses of a relationship may produce data that can determine if someone is putting too much effort into a relationship.

The theory is unique in the sense that it doesn’t necessarily measure relationships on emotional metrics. Rather, its systematic processes rely on mathematics and logic to determine balance within a relationship. While the theory can be used to measure romantic relationships, it can also be applied to determine the balance within a friendship.

Core Assumptions of Social Exchange Theory

The foundation of social exchange theory rests on several core assumptions regarding human nature and the nature of relationships. The first assumption is that humans tend to seek out rewards and avoid punishments. Another tenet is the assumption that a person begins an interaction to gain maximum profit with minimal cost — the individual is driven by “what’s in it for me?” A third assumption is that individuals tend to calculate the profit and cost before engaging. Finally, the theory assumes that people know that this “payoff” will vary from person to person, as well as with the same person over time.

How This Theory Works

The theory’s core assumptions establish a fundamental foundation within social exchange theory — one size does not fit all. A person’s expectations, as set by comparison levels, allow the theory to be viewed on a sliding scale, one that adjusts on an individual basis. If an individual’s personal relationship samples are set on a certain level, he or she will tend to use this level as a baseline for future relationships.

For example, if a person enters a new relationship after a succession of poor friendships or disastrous romantic relationships, that person’s expectations at the start of a new relationship are going to be lower than those of a person who has a tight group of friends. Conversely, if a person’s ex-girlfriend provided him with a ton of gifts and affections, he may enter into his next relationship expecting similar behaviors.

These levels of expectation can often work in conjunction with another core concept of the theory’s functionality: costs vs. benefits. This is perhaps the theory’s most known commodity, as it establishes a “give and take” metric that can be analyzed to determine how much effort one party may be putting into the relationship.

The “costs” in this theory component are things that a person may see as a negative in a relationship. A friend who constantly borrows money or a partner who consistently doesn’t do his expected chores in the house may rack up a lot of cost. “Benefits,” as they pertain to this theory, are traits that an individual may see as positive attributes. The friend who’s always willing to lend an ear in times of trouble or constantly extends an invitation for a Sunday afternoon beer may offer plenty of benefits.

According to the theory, a worthwhile relationship will be as far away from the cost category as possible. Even if there are a few costs involved in the relationship — and human behavior dictates there probably will be — if enough positive traits outweigh the negative traits, then the costs hold no value.

If the costs far outweigh the benefits, it may be an indicator that it’s time to move on; however, the theory’s aspect of evaluating alternatives prevents this decision from being automatic. Alternative evaluation involves analyzing possible replacements for an existing relationship, a process that weighs costs and benefits against a person’s comparison levels. This analysis may drive a person to the conclusion that the relationship he or she is currently in is still better than anything else that’s out there, a decision that may also cause a person to reassess the cost vs. benefit value of an existing relationship.

Putting the Theory Into Practice

From a sociological standpoint, applying the metrics that collectively build social exchange theory can be a great tool to analyze relationships and human behavior. The dynamics that go into making this theory work can be useful for sociologists to develop their own theories and concepts regarding the ways in which humans behave with each other. Make use of the social exchange theory through a career in social work by earning a Master’s Degree in Social Work.

Recommended readings:

5 Specializations in Social Work Careers

How Social Workers Make a Difference

A Day in the Life of a Licensed Clinical Social Worker (LCSW)

By Charlotte Nickerson, published Oct 28, 2021

Key Takeaways

• Social Exchange stipulates that people apply economic principles when evaluating relationships, either consciously or unconsciously, conducting cost-benefit analysis while also comparing alternatives.

• Thibaut and Kelley assume that people try to maximize the rewards they obtain from a relationship and minimize the costs (the minimax principle).
• According to social exchange theory, people will pursue relationships where rewards are greater than cost (net profit) and abandon those where costs are greater than profit (net loss). These profits can be measured in the short-term or cumulatively. The value of costs and rewards are highly subjective.
• Several scholars have expanded social exchange theory to describe power, social cohesion, and risk and uncertainty.

According to social exchange theory (Thibault & Kelly, 1959), social behavior involves social exchanges where people are motivated by obtaining something of value (reward) in exchange for forfeiting something else of value (cost).

In social exchanges, like economic exchanges, people seek profit, and are disturbed when there is no equity in an exchange or where others are rewarded more at the same costs incurred by the individual (Redmond, 2015).

Social exchange theory addresses three questions. Firstly, the question of how people make decisions about how much they are willing to give in exchange for a particular reward. Secondly, what factors influence people to pursue or terminate relationships. And lastly, Why and whether people feel resentment when they feel they have put more effort into sustaining a relationship than their partner (Redmond, 2015).

Social exchange theory has its roots in Homan’s (1958) paper Social Behavior as Exchange. In this work, Homans contrasted the actions and exchanges of individuals to the actions of institutions.

He believed that individual behaviors and exchanges could affect the actions of institutions. Blau’s (2017) Exchange and Power in Social Life drew on Homan’s focus on groups and institutions to lay the theoretical foundation for social exchange theory.

Unlike Humans, who emphasized psychology as the foundation of human decision making, Blau’s vision of social behavior paralleled microeconomics. He labeled this vision with Homan’s term, “social exchange theory” (Cook and Emerson, 1987).

Social exchange theory’s foundational principles have inspired a large number of alternate theories. These range from applications of social exchange theory in a specific concept to expanding upon the foundational principles of the theory.

Social Exchange Theory (SET) Explained

There are five guiding principles of social exchange theory (Redmond, 2015):

Principle 1: Social behavior can be explained in terms of costs, rewards, and exchanges: this principle's importance comes from how it loosely applied economics to human decision making.

Principle 2: People seek to maximize rewards and minimize costs in pursuit of the greatest profit: this reflects a belief that people are generally motivated by their own self-interest, regardless of the decision.

A relationship that at one time seemed to be high reward, low cost may shift to one with increasing costs and low rewards, causing that person to return to a more rewarding level or terminate the relationship.

Principle 3: Social interaction involves two parties, each exchanging a reward needed by the other person: in order to get rewards, people must exchange something better (Burns, 1973). This creates interdependent relationships.

Principle 4: Social exchange theory can be used to explain the development and management of interpersonal relationships: the economic principles underlying social exchange theory must be adapted so that they can apply sociologically. This has led sociologists such as Altman and Taylor (1973) to create social penetration theory to describe relational development.

Principle 5: Social exchanges affect the relationships among members of groups and organizations. For decades, researchers such as Blau (2017) have discussed how the need for advice and assistance leads to exchanges among group members.

These fortify group structures, as those who are able to give advice are rewarded with respect, prestige, or possibly reciprocal action from the person receiving the assistance. Initially seeking advice can form the basis of a mutually beneficial relationship; however, to continue, the equitable exchange needs to continue.

Costs vs. Benefits

Rewards are the amount of benefit that someone receives from a relationship. Rewards can be abstract (such as love and companionship) or concrete (such as goods and services) and be immediate or cumulative.

Ultimately, costs demotivate relationships; however, people must trade something of value (cost) for something they need or value (rewards). Like rewards, they can be either abstract or concrete, and exist instantaneously or cumulatively.

In a relationship people gain rewards (such as attention from their partner, sex, gifts and a boost to their self-esteem) and incur costs (paying money for gifts, compromise on how to spend their time or stress). There is also an opportunity cost in relationships, such as stress, arguments, compromises and time commitments, spending time with a partner that does not develop into a lasting relationship could have been spent with another partner with better long-term prospects.

How much value is placed on each cost and benefit is subjective and determined by the individual. For example, whilst some people may want to spend as much time as possible with their partner in the early stages of the relationship and see this time together as a reward of the relationship, others may value their space and see extended periods spent together as more of a necessary investment to keep the other person happy.

Profit, as in economics, is rewards minus costs. Positive outcomes happen when there is a net profit, and negative outcomes happen when there is a net loss.

Thibault and Kelley (1959) also identified a number of different stages of a relationship:

1. Sampling: partners consider the possible costs and benefits in the new relationship through direct or indirect interactions, and compare it to other relationships available.
2. Bargaining: partners exchange costs and benefits, they negotiate and identify what is the most profitable.
3. Commitment: the relationship is stable and maintained by predictable exchange of rewards.
4. Institutionalization: partners have established norms in terms of costs and benefits. They now settle down.

Expectations and Comparison Levels

The comparison level (CL) in a relationship is a judgment of how much profit an individual is receiving (benefits minus costs). The acceptable CL needed to continue to pursue a relationship changes as a person matures and can be affected by a number of external and internal factors.

External factors may include the media (younger people may want for more from a relationship after being socialized by images of romance on films and television), seeing friends and families in relationships (people who have divorced or separated parents may have a different CL to those with parents who are still married), or experiences from prior relationships, which have taught the person to expect more or less from a partner.

Internal perceptions of self-worth such as self-esteem will directly affect the CL that a person believes they are entitled to in a relationship.

Cumulative rewards and costs refers to the total rewards and costs someone has incurred over the course of a relationship. Profits add up in such a way that people will not immediately end relationships where immediate costs exceed rewards.

Not only do people assess the current profits of their relationships, but they also evaluate potential rewards and costs. Thibaut and Kelley (2017) believe that this is especially applicable at the beginning and during the stabilization phase of relationships.

Communications scholars such as Michael Sunnafrank have labeled this evaluation of the likelihood of positive and negative outcomes as predicted outcome value (1986).

Evaluating the Alternatives

Comparison level for alternatives (CLalt) refers to a person’s judgment of if they could be getting fewer costs and greater rewards from another, alternative relationship with another partner.

Steve Duck (1994) suggested that a person’s comparison level for alternatives is dependent on the level of reward and satisfaction in their current relationship. If the CL is positive, then the person may not consider the potential benefits of a relationship with another person.

People evaluate the costs and rewards of a relationship in terms of how they compare to expectations. People are likely to continue relationships which exceed their expectations and cut-off those that fall short.

Research Examining Social Exchange Theory

Rusbult (1983)- carried out a longitudinal study over a 7 months period on heterosexual college students. The participants completed questionnaires every few weeks.

He found that satisfaction, investment and alternatives predicted how committed they were to their relationship and whether it lasted. He also found that during the “honeymoon” phase of the relationship the balance of exchanges was ignored however later on relationship costs were compared with degree of satisfaction.

This supports the theory because it shows the importance of rewards in a relationship and comparisons levels it also suggests that the SET is best applied to the maintenance of relationships.

Hatfield (1989) studied people who felt over or under-benefited. The under-benefitted felt angry and deprived while the over-benefited felt guilty and uncomfortable.

This supports SET theory by suggesting that regardless of whether individuals benefitted, they do not wish to maintain a relationship which is unfair. This also highlights a weakness of SET, it ignores equity.

Power

A number of social exchange theorists have focused extensively on power. These theories picture power as being based on someone’s ability to control and manage another person through being able to meet their needs.

Emerson (1962) acknowledges that every relationship is about power, and that withholding rewards or punishment can create negative actions (Blau, 2017).

For example, an employer can withhold a bonus from an employee until he has met a particular work standard. Social structure can also define power relationships — the position of “employer” gives whoever is in that position the power to fire an employee, and this power originates exclusively from the position the employer holds.

Social structures involving power also necessitate unequal rewards — employers are usually paid more than employees. This system of power and unequal rewards is mediated by social exchanges that weigh rewards and costs.

Social structure is both a product of social exchanges and constrained by it (Cook and Whitmeyer, 1992). Power constraints, for example, who can interact with whom in an organization.

The study of how power impacts individuals access to other organization members is called exchange network theory (Redmond, 2015). Central to Emerson’s framework of power is exchange relations as a unit of analysis. This shift, according to Turner (1978), made exchange theory less reductionist and tautological.

Rather than emphasizing the value of rewards to individuals, Emerson sought to understand the structure of the networks and groups that embed exchange relations. This emphasis on social relations differentiated Emerson from Homans and Blau (Cook and Emerson, 1987).

Risk and Uncertainty

Cook and Emerson (1978) established that people are more likely to form committed exchange relationships when they are in an uncertain environment, as this reduces how much these individuals seek alternative exchange relationships, reducing the inequalities of power in the exchange relationship.

Kollock (1995) also notes that uncertainty also creates higher feelings of trust in those in an exchange relationship. Yamagishi et. al. (1998) motivates this heightened trust. When there is low uncertainty, individuals are more likely to maximize their access to rewards by avoiding commitment.

However, in uncertain situations, people commit in order to avoid possible exploitation by new partners (Cook and Emerson, 1987). Different types of exchanges vary in how much risk and uncertainty is involved in them.

For example, exchanges that are reciprocal usually result in more trust than negotiated exchanges with binding agreements (Molm, 2010; Cook and Emerson, 1987).

Relational Cohesion

According to Lawler and Yoon (1993), positive emotions and then feelings of cohesion and solidarity develop from the belief that the outcomes of exchanges are positive and frequent.

People have fewer positive feelings and are less likely to commit to exchanges that do not generate positive feelings or that are infrequent. Anthropological theories attempting to link exchange and solidarity have complexified social exchange theory by detailing exchange theory’s emotional basis.

It has connected social exchange theories to the study of social commitments (Lawler, 2009) and social order. For example, Lawler et al. (2008) have explained how reciprocal, negotiated, generalized, and productive exchange reflect emotional responses, how one thinks of themselves in the group, and attachment to the group.

These bonds are strong in joint activities and exchanges that promote a joint sense of responsibility.

Critical Evaluation

Operationalizing rewards and costs is hugely subjective, making comparisons between people and relationships in controlled settings very difficult. Most studies which are used to support Social Exchange Theory account for this by using artificial procedures in laboratory settings, reducing the external validity of the findings.

Michael Argyle (1987) questions whether it is the CL which leads to dissatisfaction with the relationship, or dissatisfaction which leads to this analysis. It may be that Social Exchange Theory serves as a justification for dissatisfaction rather than the cause of it.

Social Exchange Theory ignores the idea of social equity explained by the next relationship theory concerning equality in a relationship – would a partner really feel satisfied in a relationship where they received all of the rewards and their partner incurred all of the costs?

The theory predicts that if the costs outweigh the benefits dissatisfaction will occur and the relationship will end, however it might be that when we are dissatisfied we value less the benefits and value more the costs and start considering more attractive alternatives. However this does not take into account the size of the investment already put in the relationship (see Rusbult’s investment model of commitment).

Real world application – Social Exchange Theory is used in Integrated behavioral Couples Therapy where couples are taught how to increase the proportion of positive exchanges and decrease negative exchanges. Chritensen (2004) found that it led to a significant improvement in two third of the 40 couples who took part in the study. This shows high mundane realism in terms of the practical real-world application of the theory therefore SET is really beneficial at improving real relationships.

Many have criticized the original propositions and assumptions in Homans social exchange theory. Prominently, scholars have questioned the degree to which humans are rational and thus make conscious, continuous cost-benefit analysis in their analysis (Redmond, 2015).

Homan has also drawn criticism for his methodology, as his analysis of human behavior relies more on observations of, for example, how pigeons react to reinforcements than on studying human’s calculated decision making and reality.

There has also been a considerable amount of confusion in social exchange theory about the variability of reward values. Because ten dollars is a very different reward for, say, a homeless person and a millionaire, measuring reward value absolutely and being able to conduct social exchange theory research is problematic.

There are also symbolic rewards, where the cost of creating a reward (for example, baking cookies) is unrelated to the symbolic value of the gesture. Homan’s social exchange theory also fails to address the restrictions created by roles and social structure.

Exchanges can happen without any option to negotiate, and actions carried out of the obligation of a role could be carried out without an individual thinking about the reward of each interaction. For example, an office worker may not think about how much he is being paid per hour to sit in a meeting, because meetings are obligatory to him.

Finally, critics call Homans social exchange theory overly reductionist, as it only considers costs, rewards, profits, and exchanges in human interaction. Although derivative research (such as those on power, equity, and interdependence) has complexified the theory, scholars still consider social exchange theory to be poor at meeting its goals (Redmond, 2015).

Charlotte Nickerson is a member of the Class of 2024 at Harvard University. Coming from a research background in biology and archeology, Charlotte currently studies how digital and physical space shapes human beliefs, norms, and behaviors and how this can be used to create businesses with greater social impact.

How to reference this article:

Nickerson, C. (2021, Oct 28). The Social Exchange Theory in Relationships. Simply Psychology. www.simplypsychology.org/what-is-social-exchange-theory.html

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