Karen S Cook & Eric Rice. Encyclopedia of Social Theory. Editor: George Ritzer, Volume 2, Sage Reference, 2005.
Social exchange theory is one of the major theoretical perspectives in sociology. It takes its place alongside social systems theory, symbolic interactionism, structural-functionalism, and conflict theory. Three of the major exchange theorists are George C. Homans, Peter Blau, and Richard M. Emerson. This general perspective has roots in a number of disciplines in the social sciences, including the fields of psychology, sociology, anthropology, and microeconomics. Some of the early theoretical influences came from pragmatism, utilitarianism, behaviorism, and functionalism. Other sources of influence include the major works of several social psychologists and cultural anthropologists. From psychology, the work of John Thibaut and Harold Kelley, notably their prize-winning book The Social Psychology of Groups (1959, 1986), is closest to the analysis developed by exchange theorists in sociology, especially Homans and later Emerson. The other major influence on theories of social exchange that derived from psychology was behaviorism. It had a strong impact on the development of Homans’s theory of social behavior as exchange and the early work of Richard Emerson and later the work of Linda Molm. In cultural anthropology, the works of Claude Levi-Strauss, Bronislaw Malinowski, and Marcel Mauss were especially influential.
The first formal treatment of social behavior as exchange in sociology appeared in George Homans’s article published in 1958 in the American Sociological Review. This was also a major topic in his presidential address on “bringing men back in” at the American Sociological Association meetings. He was reacting to the growing dominance of Parsonianism and the focus on large-scale social systems in sociological theory. Homans argued that theory should focus on the subinstitutional level of analysis, specifying the determinants of “elementary” social behavior that formed the bedrock of groups and organizations. For him, this meant a primary emphasis on the actions of individuals in direct interaction with one another in contrast to the study of institutions and institutional behavior driven by social prescriptions or normative elements in society, the focus of Parsons. Homans believed that the subinstitutional elementary forms of social behavior could “crack the institutional crust,” forcing changes in the institutionalized ways of doing things. Rebellion, revolution, and even more modest forms of social change often take this form. They provide the impetus for social change.
Homans’ most sustained work on social exchange is his book Social Behavior: Its Elementary Forms, published in 1961 and revised in 1974. In this book, he lays out his propositions of elementary social behavior. These propositions are based to a large extent on the work of his Harvard colleague, B. F. Skinner and his ideas about reinforcement processes as determinants of behavior and behavioral change. Skinner defined social exchange as the exchange of activity, tangible or intangible, and more or less rewarding or costly, between at least two persons (Homans 1961:13). Influenced by deductive theorizing and logical positivism, Homans believed that many important aspects of social behavior could be derived from five simple behavioral propositions. He embraced reductionism, arguing that the behavior of collectivities could be reduced to principles of elementary behavior. For Homans, nothing emerged in social groups that could not be explained by propositions about individuals, together with the given conditions under which they were interacting.
Homans’s primary focus was the social behavior that emerged as a result of mutual reinforcement of two parties involved in a dyadic exchange. His theoretical consideration of distributive justice, balance, power, status, authority, leadership, and solidarity is based on an analysis of direct exchange. Two main criticisms of Homans’s work were that it was too reductionistic (i.e., it took the principles of psychology as the basis for sociological phenomena) and that it underplayed the significance of the institutional level of analysis and the social processes and structures that emerge from social interaction. These criticisms were addressed in the subsequent work of Peter Blau and Richard Emerson.
Blau (1964, 1986), in his well-known book, Exchange and Power in Social Life, developed a much more extensive treatment of the links between microlevel social behavior and the groups, organizations, and institutions it constitutes. For Blau, relationships between the elements of the structure create emergent processes that evolve from the interaction of the parts but that are not reducible to properties of these individual elements. Thus, a major difference between the perspectives of Homans and Blau is the latter’s recognition of “emergent” processes at more complex levels of social organization. Blau framed his micro-exchange theory in terms of rewards and costs as did Homans, but he took a more utilitarian approach. Social exchange, for Blau (1964), “refers to voluntary actions of individuals that are motivated by the returns they are expected to bring and typically do in fact bring from others” (p. 91). Blau defined exchange behavior as behavior explicitly oriented to the ends that can be achieved through interaction with others (Blau 1986:5). The microlevel exchange theory in Blau’s work represents one of the first attempts to apply utilitarianism derived from microeconomics to social behavior. Later efforts include those of Gary Becker, a Nobel Prize-winning economist.
Blau focused primarily on the reciprocal exchange of extrinsic benefits and the forms of association and emergent social structures created by this kind of social interaction. In social exchange more than in economic exchange, the exact nature of the obligations to return the favor or resources of value is often not specified in advance. There is a general expectation of some future return, but it is frequently based on reciprocity norms rather than explicit negotiation. Subsequently, this form of social exchange has been identified as reciprocal or “non-negotiated” exchange in contrast to negotiated exchange in which there are explicit, often binding terms of trade.
Principles of social attraction were used by Blau to specify the conditions under which behavior leads to the initial formation of exchange relations. Social exchange processes give rise to differentiation in social status and power based on the dependence of some actors on others for the provision of valued goods and services. Much of the remaining focus of his book is on the structure of social exchange and emergent social processes at the group and organizational level. His explicit attempt to build a theory of social structure on the basis of a microlevel theory of exchange was influential in Emerson’s work, although they used different theoretical strategies. Blau’s discussion of dependence as a determinant of power drew on Emerson’s (1962) early work on power. In addition to his effort to build a macrosocial theory of structure on the basis of a microsocial theory of behavior, Blau identified generic social processes and mechanisms that he viewed as operative at various levels of social organization. These included cooperation, collective action, legitimacy, opposition, and conflict. His work set the stage for a number of subsequent developments in exchange theory.
Homans and Blau popularized exchange theorizing in the late 1960s and early 1970s, but sustained empirical research on the topic did not begin until the mid-1970s largely as a result of the influence of Emerson’s (1972) more formal theoretical work, based on his earlier treatment of power-dependence relations. Emerson built a conception of social exchange around his fundamental insights concerning power in social relations. He, like Blau, made power and inequality central to his treatment of exchange processes. And, like Blau, he viewed his theory of social exchange as the initial step toward building a general theory of social structure. The structures of primary interest were the networks formed as a result of the connections among a set of actors engaged in social exchange with one another. Two of Emerson’s distinct contributions to exchange theory in sociology are his fundamental insight into the relational nature of power and his extension of exchange theory to analyze the social networks created by exchange relations. Subsequent work by Markovsky, Willer, Skvoretz, Lawler, Molm, Bonacich, Friedkin, and others built on these developments.
For Emerson, the relationship between power and social structure was the central theoretical problem in social exchange theory. From his earliest work in social exchange, Emerson (1962) defined power in relational terms as a function of the dependence of one actor on another. The power of actor A over actor B in the A x: B y exchange relation (where x and y represent resources of value) increases as a function of the value of y to A and decreases proportional to the degree of availability of y to A from alternative sources (other than B). These two factors (resource value and availability) determine the level of B’s dependence on A and thus A’s power over B. That is, the power of A over B is a direct function of B’s dependence on A in the A:B exchange relation. The more dependent B is on A, the more power A has over B. Embedding this relationship in a network of exchange opportunities creates the basis for a structural theory of power in exchange networks.
This relational conception of power has two central features that helped to generate a large body of research on social exchange networks. First, power is treated explicitly as relational, not simply the property of a given actor. Second, power is potential power and is derived from the resource connections among actors that may or may not be used. Exchange relations are connected to the extent that exchange in one relation affects or is affected by the nature of the exchange in another relation. The connection according to Emerson can either be positive or negative. A negative connection means that exchange in one relation reduces the amount or frequency of exchange in another exchange relation involving one of the same parties (e.g., the A-B and B-C exchange relations are negatively connected at B if exchange in the A-B relation reduces the frequency or amount of exchange in the B-C relation). A connection is positive if the amount or frequency of exchange in one relation increases the amount or frequency of exchange in an exchange relation involving at least one of the parties to both exchanges (e.g., the A-B relation is positively connected to the B-C relation if exchange in the A-B relation increases the frequency or amount of exchange in the B-C relation). These are modal cases, however; exchange in two relations may also be “mixed” involving both positive and negative exchange connections relating to different aspects (or dimensions) of exchange. Exchange in more complicated networks often involves both positive and negative connections (see Cook, Emerson, Gillmore, and Yamagishi 1983).
Emerson expanded this important direction of development in exchange theory in subsequent publications formulating what is now known as exchange network theory. In his work with Cook (e.g., Cook and Emerson 1978), Emerson argued and experimentally demonstrated that power was clearly a function of relative dependence. Moreover, dependence was a feature of networks of interconnected exchange partners whose relative social power was the result of the shape of the social network and the positions they occupied. While Cook and Emerson concerned themselves with other exchange outcomes, particularly commitment formation, it was the connection between the use of power and the structure of social networks that became the central focus of social exchange theorists for over two decades.
The key assumptions of exchange theory, summarized recently by Molm and Cook (1995:210), include the following: (1) Behavior is motivated by the desire to increase gain and to avoid loss (or to increase outcomes that are positively valued and to decrease outcomes that are negatively valued), (2) exchange relations develop in structures of mutual dependence (both parties have some reason to engage in exchange to obtain resources of value or there would be no need to form an exchange relation), (3) actors engage in recurrent, mutually contingent exchanges with specific partners over time (i.e., they are not engaged in simple one-shot transactions), and (4) valued outcomes obey the economic law of diminishing marginal utility (or the psychological principle of satiation). Based on these core assumptions various predictions are made about the behavior of actors engaged in exchange and the effects of different factors on the outcomes of exchange. The power-dependence principle, in addition, allows for the formulation of predictions concerning the effects of increasing the value of the resources involved in the exchange and the availability of resources from alternate sources.
One of the most consistent findings in the experimental research on social exchange is that relative position in a network of exchange relations produces differences in the relative use of power, manifest in the unequal distribution of rewards across positions in a social network (Bienenstock and Bonacich 1993; Cook and Emerson 1978; Cook et al. 1983; Friedkin 1992; Markovsky et al. 1988; Markovsky et al. 1993; Skvoretz and Willer 1993). While several competing microtheories connecting network structure and power use have emerged over the past two decades, these competing perspectives converge on the prediction that power differentials relate to actor’s network positions in exchange networks (see Skvoretz and Willer 1993:803). The theories differ, however, in the causal mechanisms at work in converting differentials in network position into actual power differences. The Graph-Theoretic Power Index approach uses elementary theory and focuses on the role of exclusion in networks (Markovsky et al. 1988; Markovsky et al. 1993; Skvoretz and Willer 1993). Core theory borrows from game theory and focuses on specifying the viable coalitions among exchange partners (Bienenstock and Bonacich 1992, 1993). Equidependence theory is based on power-dependence reasoning and specifies equilibrium points at which the dependence between partners reaches a “balance” (Cook and Yamagishi 1992). Finally, expected value theory (Friedkin 1992) is based on a probabilistic logic and looks at the expected value of exchanges weighted by their likelihood of occurrence (For a detailed discussion of the relative merits of these theories and their predictive abilities see Skvoretz and Willer 1993. For thorough discussions of each of these alternative formulations see the Social Networks special issue edited by Willer [1992]).
Bienenstock and Bonacich (1993) developed an approach to the analysis of exchange in networks of social relations based on game theoretic concepts such as the “core” (a solution set). Different network structures not only produce different power distributions, but also, different coalitions emerge as solutions to exchange. This argument implies that the structural arrangement of actors in relative position to one another can be an impetus for some subsets of actors to exchange more frequently than others. Bienenstock and Bonacich (1993) find that the core typically makes effective predictions about the frequency of exchanges as well as relative power differences among the actors in the network.
Cook and Yamagishi (1992) argue that social exchanges in a network proceed toward an equilibrium point at which partners depend equally on each other for valued resources. This “equidependence” principle has implications for partner selection as well as for exchange outcomes. They identify three different types of relations that can emerge from a network of potential exchange relations (which they refer to as an opportunity structure). Exchange relations are those in which exchanges routinely occur. Nonrelations are potential partnerships within the network that are never used and that if removed from the network do not affect the predicted distribution of power. Finally, latent relations are potential exchange relations, which also remain unused but which if removed affect the subsequent predicted distribution of power across positions in the network. The existence of latent relations can be important because they may be activated at any time as an alternative source of valued resources. When they are, they modify the distribution of power in the network.
Friedkin (1992) also argues that some relations involve more frequent interaction than others, depending on the structure of the alternative relations in the exchange network. The expected value of a particular exchange weighted by the probability of the occurrence of that exchange determines the payoffs for each exchange. The fact that some relations are used more than others is central to Friedkin’s explanation of how power becomes differentially distributed across positions in a network.
The Graph-Theoretic Power Index (GPI), developed by Markovsky and Willer, predicts resource acquisition by actors in positions in exchange networks. It is a key element of what has come to be known as network exchange theory (Markovsky, Willer, and Patton 1988). GPI is based on the probability of particular partnerships being formed (see Markovsky et al. 1993:200-04 for a detailed explanation). Markovsky and his collaborators argue that some types of structures have more of an impetus toward the exclusion of some parties from exchange than do others. (In Emerson’s terminology, networks that are negatively connected lead to more exclusion because they include alternatives that are competing sources of value.) Some network structures can be characterized as weak-power networks and others as strong-power networks. The main difference between these two types of networks is that strong-power networks include positions that can exclude particular partners without affecting their own relative power or benefit levels. One implication of this distinction is that strong-power networks will tend to have lower levels of behavioral commitment between exchange parties than will weak-power networks, because strong-power structures allow the arbitrary exclusion of some partners (Markovsky et al. 1993) facilitating power use.
Recent developments in Network Exchange Theory developed by Markovsky and Willer include efforts to study network dynamics, coalition formation, and the links of exchange processes in networks to other social processes like the emergence of status differences and the legitimation of inequality. In addition, Markovsky has recently worked on the linkages between the study of exchange networks and complexity theory, a rapidly developing field of interdisciplinary research.
Molm started with Emerson’s two central propositions: Power is relational and power is a function of dependence, but her program of research took a direction that was distinct from the other positional theories of social exchange noted above. First, Molm focused on exchanges that are not negotiated but that are reciprocal acts of contingent giving (e.g., Molm, Peterson, and Takahashi 1999). In reciprocal exchange, actors do not bargain over the division of a finite pool of resources (or a fixed range of positive returns); rather, exchange is a process of “gift giving” or the simple act of the provision of a valued resource or service, and exchange relationships develop over time through repeated acts of reciprocal giving. The failure of reciprocity results in infrequent exchange. Second, power is not solely tied to the legitimate use of authority. Power may take the form of coercion or punishment. Whereas the other theories view the use of power as wielding structural influence through the threat and/or practice of exclusion from exchange (especially when there is a power-imbalance in the network), Molm considers how actors may impose punitive sanctions or negative outcomes on one another. The threat or practice of exclusion is most effective in networks in which there is a large power difference between the actors. And actors who are most dependent (least powerful) are most likely to be excluded from exchange in certain networks (e.g., networks in which there is a monopoly structure).
Molm’s (Coercive Power in Social Exchange, 1997) work demonstrates that not all power use is structurally motivated. Punishment power is not used unwittingly in the same way in which exclusion can produce the unconscious use of reward power in negotiated exchange contexts. Power use can also have strategic motivations. Punishment power may be used much less frequently, but when it is used, it is most likely to be employed purposively to influence the future actions of an exchange partner. The less frequent use of punishment power results from the risk that the target of punishment will simply withdraw from the relationship altogether. Molm extends exchange theory by investigating alternative sources of power. Power use based on the application of punishment is distinct from power use that involves differential rewards. Molm’s research also demonstrates how coercive power is constrained by the structures of dependence. The primary force in exchange relations is the dependence on rewards, which motivates both the use of punishment as well as reward power.
Since those involved in ongoing exchange relations frequently have control over both rewards and punishments (even if it is only the withholding of rewarding behaviors) Molm’s research facilitates the investigation of more complex exchange situations. In addition, Molm has begun to specify the nature of the precise mechanisms that relate structural determinants of power with the actual use of power by those in various positions of power, something previous theorists had not yet accomplished. Norms of fairness or justice and attitudes toward risk play a central role in this analysis. Conceptions of fairness constrain the use of power under some conditions, especially the use of coercive power, and risk aversion makes some actors unwilling to use the structural power at their disposal for fear of loss. In more recent work, Molm, Takahashi, and Peterson (2003), analyze the relationship between different forms of social exchange (e.g., negotiated versus reciprocal exchange) as a key factor in predicting exchange outcomes. The relative importance of fairness, risk aversion, and the strategic use of power varies, depending on whether or not the exchange is negotiated directly between the parties involved or it involves reciprocal, non-negotiated exchange instead.
Lawler and his collaborators (e.g., Lawler and Yoon 1996) have recently developed a new theory of relational cohesion based on principles of social exchange. The focus of this work is to examine the conditions under which social exchange relations emerge from opportunities for exchange and lead to the emergence of positive emotions about the exchange relation. These positive emotions may subsequently lead to relational cohesion, commitment, or solidarity. Positive emotions develop based on positive evaluations of the outcomes of exchanges between actors and the frequency of their exchange. Low frequency and unfavorable (or less favorable) outcome exchanges are much less likely to lead to commitment to the relation, to positive feelings about the exchange and to feelings of cohesiveness or solidarity (i.e., what Lawler terms a “we-feeling”). This line of research returns to some of the earlier anthropological concerns about the nature of the links between exchange and solidarity in social relations. In addition, it expands the scope of exchange theory to include the emotional bases of exchange, commitment, and cohesion.
Empirical research on social exchange theory has also focused more recently on the effects of important factors such as uncertainty and risk on the nature and structure of social exchange (including the work of Molm). Facing uncertain environments actors involved in exchange are more likely to seek to form committed exchange relations (Cook and Emerson 1978; Kollock 1994; Lawler and Yoon 1996) or networks of trusted exchange partners. A significant effect of the emergence of commitment in many networks is that it reduces the extent to which actors seek exchange with alternative partners and thus serves to reduce power inequalities both within the exchange relation and within the network in which the relation is embedded (Rice 2003). Kollock’s (1994) work demonstrates that uncertainty not only results in commitment formation as a means of reducing uncertainty, but also tends to be correlated with perceptions of trustworthiness of the actors involved in the exchange relations. Recent work on trust in social exchange relations treats trust as an emergent property in certain types of exchange settings.
Yamagishi, Cook, and Watabe (1998) report that trust emerges in exchange relations under conditions of high uncertainty when actors begin to form commitments to exclusive exchange relations in an attempt to avoid the possibility of exploitation by unknown actors who enter the exchange opportunity structure. Given low uncertainty, actors are much more likely to continue to “play the market” and to avoid forming commitments to specific partners in order to maximize their access to valued resources. (Uncertainty in these experiments refers to the likelihood of being exploited by a new partner in a network of exchange opportunities that changes over time.) In recent research on trust, uncertainty, and vulnerability to exploitation are often defined as two of the key elements of situations in which trust considerations are paramount (e.g., Heimer 2001). Cook, Rice, and Gerbasi (forthcoming) identify the types of economic uncertainty that lead to the formation of trust networks for exchange. Trust networks, if they become closed networks, actually may retard the transition to market economies under high economic uncertainty such as that characteristic of Eastern European countries and other countries making the transition from socialist to capitalist economies. Other implications of social exchange theory for economic relations are explored in Cook et al. (forthcoming). New applications of social exchange theory to macrolevel social structures and processes are a fitting tribute to Blau’s enduring influence on the development of exchange theory, despite his own skepticism about the links between microlevel theories of exchange and macrolevel social structures and processes.