Understanding Social Exchange Theory

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Social exchange theory is a model for interpreting society as a series of interactions between people that are based on estimates of rewards and punishments. According to this view, our interactions are determined by the rewards or punishments that we expect to receive from others, which we evaluate using a cost-benefit analysis model (whether consciously or subconsciously).


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.

According to this theory, the formula for predicting the behavior of any individual in any situation is:

  • Behavior (profits) = Rewards of interaction – costs of interaction.

Rewards can come in many forms: social recognition, money, gifts, and even subtle everyday gestures like 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.

While social exchange theory is found in economics and psychology, it was first developed by the sociologist George Homans, who wrote about it in a 1958 essay titled "Social Behavior as Exchange." Later, sociologists Peter Blau and Richard Emerson further developed the theory.


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 by asking someone else out. On the other hand, if you ask someone out on a date and they reply, “No way!” then you have received a punishment that will probably cause you to shy away from repeating this type of interaction with the same person 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 allow them to consider the alternative, more profitable situations relative to their present situation.
  • People are goal-oriented in a freely competitive system.
  • The 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 a 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.


Many critique this theory for presuming that people always make rational decisions, and point out that this theoretical model fails to capture the power that emotions play in our daily lives and in our interactions with others. This theory also undercuts the power of social structures and forces, which unconsciously shape our perception of the world and our experiences within it, and play a strong role in shaping our interactions with others.

Sources and Further Reading

  • Blau, Peter. "Exchange and Power in Social Life." New York: Wiley, 1964.
  • Cook, Karen S. "Exchange: Social." International Encyclopedia of the Social & Behavioral Sciences. Ed. Wright, James D. 2nd ed. Oxford: Elsevier, 2015. 482–88. 
  • Cook, Karen S. and Richard M. Emerson. "Power, equity and commitment in exchange networks. American Sociological Review 43 (1978): 721–39.
  • Emerson, Richard M. "Social Exchange Theory." Annual Review of Sociology 2 (1976): 335–62. 
  • Homans, George C. "Social Behavior as Exchange." American Journal of Sociology 63.6 (1958): 597–606.
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Crossman, Ashley. "Understanding Social Exchange Theory." ThoughtCo, Aug. 29, 2020, thoughtco.com/social-exchange-theory-3026634. Crossman, Ashley. (2020, August 29). Understanding Social Exchange Theory. Retrieved from https://www.thoughtco.com/social-exchange-theory-3026634 Crossman, Ashley. "Understanding Social Exchange Theory." ThoughtCo. https://www.thoughtco.com/social-exchange-theory-3026634 (accessed June 4, 2023).