Theory & Science (2003)

ISSN: 1527-5558

Some Amendments to Social Exchange Theory: A Sociological Perspective

Milan Zafirovski 1
Department of Sociology, University of North Texas


The exchange paradigm entertains high aspirations concerning its place within social psychology and generally sociology and psychology. This is epitomized, for example, by its fundamental premise that all social life can be treated as an exchange of rewards or resources between actors. Such nature of social life is often the rationale for the claim that the social exchange paradigm features equivalent generality and relevance for sociological theory. This claim is reexamined in this paper, by putting emphasis on rational choice and behaviorist versions of social exchange theory. The examination does not provide prima facie support for the claims of social exchange theory, especially its economic-behavioral formulations. Instead, premised on sociological social psychology or psycho-sociology an alternative conception of social exchange is formulated and empirically estimated as a viable alternative to the current theory. The paper attempts to make a contribution toward the integration of sociological and social-psychological theory. The main conclusion is that actors in exchange can be not only individuals but also groups, and that in-group processes and intergroup relations are more complex than being sets of market transactions.


In contemporary sociology, notably sociological social psychology (Stolte, Fine, and Cook 2001), one of the most prominent and ambitious (Alexander, 1990; Cook, 2000) theoretical conceptions is probably exchange theory. In retrospect, social exchange theory has been introduced to sociology by psychologically (Emerson 1962; Homans 1961) and economically (Blau, 1964) minded sociologists, as well as in psychology by social psychologists (Thibaut and Kelley, 1959) and partly in cultural anthropology by economic anthropologists (e.g. Goodfellow, 1939). The key tenet of social exchange theory is that human behavior is in essence an exchange (Homans, 1961: 12-3), particularly of rewards (Homans, 1961: 317) or resources of primarily material character (wealth) (Cook, 2000; Stolte et al., 2001) and secondarily of symbolic attributes. Presumably, such exchange transactions permeate all social phenomena (Coleman, 1990: 37), including group processes and intergroup relations, which are conceived as sets or joint outcomes of voluntary individual actions induced by rewards (Blau, 1964: 91). In this view, exchange transactions constitute the foundation and open secret (Homans, 1961: 317) of social life, of group processes and relations particularly.

Exchange theorists have elaborated and summarized the above argument as follows. Arguably, social action is an exchange of (tangible or intangible) activities and rewards/costs between individuals on the grounds that people have always explained their conduct by means of its benefits and costs to them (Homans, 1961: 12-3). Exchange represents the basis of human behavior (Homans, 1961: 317) and is pervasive throughout social life (Coleman, 1990: 37-39). As regards the character of social exchange in relation to economic transactions, the former is constituted by activities of purposive actors in the case of a “configuration of interests and resources”, and the latter (a market institution) by interdependent exchange transactions (Coleman, 1986). Assuming that exchange transactions are reciprocal, if reciprocity is not observed such transactions will tend to eventually discontinue. In psychological terms, an exchange is therefore defined as social interaction that is characterized by reciprocal stimuli or mutual reinforcements. Namely, exchange relations are “by definition reciprocal, and if this reciprocity is broken the relationship will extinguish over time. Within the attribute of reciprocal reinforcement, the concept of an exchange relation contains an ’exchange ratio’ [balance-imbalance]. This variable sets the stage for introducing dependence, power, and cohesion” (Emerson, 1969: 387-389).

The task of social exchange theory is then to investigate the reciprocal (mainly material) advantages that individuals draw from their exchange transactions on the premise that they engage in and sustain most social, including noneconomic, relations in the rational expectations of such advantages independently of normative or group considerations. In short, exchange theory in sociology studies the “mutual gratifications persons provide one another that sustain social relations. The basic assumption is that persons establish social associations because they expect them to be rewarding. This implies that the exchange of rewards is a starting mechanism of social relations that is not contingent on norms prescribing obligations” (Blau, 1994: 152-156). In particular, exchange theory provides sociology with a “clear conception of the material and resource basis of social action” (Cook, 2000: 688) and thus is “well-suited for grasping material/extrinsic exchange” (Stolte et al., 2001: 411). Hence, the exchange approach in sociology is described as the “economic analysis of noneconomic social situations” (Emerson, 1976: 336).

Modern Social Exchange Theory

Like most rational choice theorists, social exchange theory’s advocates sometimes make proposals for resurrecting the “species of homo economicus” (Friedman, 1996:.3), albeit in partly modified forms. They explicitly seek to rehabilitate homo economicus in the image of what is described as a new, plain “economic man” (Homans, 1961: 79-81), which implies a resort to a sort of primitive folk psychology, like in the case of rational choice theory. Recently, some rational choice theorists have renamed such an economic man as homo socio-economicus (Lindenberg, 1990) or homo economicus maturus (Frey and Oberholzer-Gee, 1997). Ironically, such an actor concept seems closer to homo sociologicus that exchange and other rational choice theorists reject than to homo economicus in the strict sense, as an assumed embodiment of perfect rationality and driven by the ingrained propensity to exchange for maximum gain. Admittedly, following Pareto and Weber. homo sociologicus is “an advance over homo oeconomicus. Homo sociologicus is an intentional actor, endowed with a set of preferences, seeking acceptable ways of realising his objectives, conscious of the degree of control over the elements of the situation (of the structural constraints), acting in the light of limited information and in a situation of uncertainty. The key feature of homo sociologicus is limited rationality” (Boudon, 1982: 9).

Typically social exchange theory, especially its rational choice version, explains non-economic exchange processes by the operation of homo economicus and other economic laws, especially marginal utility, supply and demand and related market principles (Coleman, 1990; Emerson, 1976; Michener, Cohen, and Sorensen, 1977). Occasionally, or in post-hoc theory development characteristic of rational choice theory, some exchange theorists admit that social interaction is different from economic transactions by placing it between pure calculation of advantage and pure expression of love (Blau, 1994: 91). This admission (or contradiction 2 ) is condensed in this way: “A distinction between social and economic exchange is that social exchange engenders diffuse obligations, whereas those in economic exchange are specified. The diffuseness of the obligations implies that large-scale social exchange is not likely to occur unless social bonds rooted in trust have been established. The mutual advantages from the association fortify their social bond. This may appear to be merely a by-product of social exchange, but it is its most important product” (Blau, 1994: 152-156).

Despite such distinctions, the typical argument is that economic laws, viz., the principle of marginal utility, the law of supply and demand, etc., are operative in social exchanges or extra-economic relations (Emerson, 1976, Macy and Flache, 1995). Arguably, the principle of marginal utility, for instance, applies to non-economic situations just as economic exchange (Blau, 1994: 158-159). Specifically, such a principle is applicable in the form of diminishing marginal utility and utility optimization at the point at which the former is zero 3 . Following economists, exchange theorists argue that social actors have a “single principle of action to maximize their realization of interests. Through exchanges there is a reduction in the discrepancy between interest and control, to the point where an equilibrium occurs” 4 (Coleman, 1990: 39).

Arguably, actors forego ownership or power 5 in that they give up control for the sake of gaining utility (Coleman, 1994: 169) via market transactions as well as social exchange.

Following economics’ treatment of the market as a quintessential phenomenon vis-à-vis the rest of society, rational choice and behaviorist models explicitly (Emerson, 1969: 385-386) or implicitly (Cook, 1990: 115-116) treat exchange as more fundamental than power. In this view, the ultimate determinant of power lies in the networks of exchange transactions underscored by an objective structure of alternatives or set of feasible options for exchanges. Presumably, such determination makes power (and dependence) a structural phenomenon that inheres to positions in exchange networks. (A recent alternative to this view is a process model which links power to participation levels within exchange networks in accordance with actors’ social identity standards [Burke, 1997: 135-137].) Social exchange theory specifies power/dependence relations by the inverse association between the two, so that (un)reciprocity generates the problem of (in)equality. In an early formulation (Emerson, 1962: 33), the power of “A over B is the amount of resistance on the part of B which can be overcome by A. Pab = Dba; the power of A over B is equal to and based upon the dependence of B upon A. A power-dependence relation [is]: Pab = Dba, Pba = Dab.” The modern social exchange paradigm adopts this proposition as (Emerson’s) “power-dependence theory” (Molm and Peterson, 1999).

In rational choice models, power distribution among particular actors or positions is a function of resource availability from feasible options in exchange networks of negative connections alone (e.g., competition or conflict), local resource scarcity in networks of only positive connections (e.g., cooperation), and a conjunction of network positions (e.g., the distance from the sources) and the control of resources (Yamagishi, Gilmore and Cook, 1988: 851). Overall, these models establish a sort of equation between power or dependence and material resources or wealth, in which the former equals the total value of the latter (Yamaguchi, 1997: 840). This indicates that in rational-choice exchange theory the notion of power is just a “generalization of the wealth concept in economic theory” (Fararo, 2001: 266). Specifically, the power ratio between actors is a reciprocal of the exchange rates between them: A’s power over B is the greater, the less resources or wealth the first exchanges with the second. Like commodities’ prices, these rates are assumed to reflect the marginal utilities of exchanges with different (actual and potential) actors and to be equal at equilibrium. For such equilibrium to be reached, uniform power ratios or symmetrical dependence relations between actors are the condition. Extending the wealth-power equation to the macro-level, some exchange theorists argue that an economy where power is measured by wealth represents the closest approximation to a “perfect” social system (Coleman, 1990: 720). Such an equation resembles the Marxian equivalence between capital and power, as (if) Marxism has the same tendency as rational-choice exchange theory to trace the origin of socio-political inequality to economic transactions (Curtis, 1986). This seems ironic given that most exchange (e.g. Homans) and rational choice (e.g. Coleman) theorists view Marxism (and structural sociology) as incompatible with their theory, with some exceptions (e.g. Elster). In turn, such an equation indicates that rational choice versions of exchange theory are also inconsistent with Weberian sociology in which (political) power is not a mere extension of wealth or capital but a phenomenon with relative autonomy in that it can be pursued and valued, as Weber put it, “for its own sake”. Some other formulations of exchange theory implicitly acknowledge this disjuncture by stating that exchange networks comprise overlapping, yet autonomous domains of power and exchange (Markovsky, Willer and Patton, 1990).

For illustration, some behaviorist versions of the theory assume that actors exercise both reward and punishment or coercive power, with the former being the probable strategic action of the powerful and the later of the weak (Molm, 1989). Presumably, since powerful actors have a less intense need to use power strategies (Molm, 1990), the resort to strategic action relates not to the desire to reinforce the impact of power but to redress its absence or imbalance by the weak. Yet, the latter rarely employ such strategies, because the perceived risk of retaliation by the powerful and fear of loss limit the strategic use of coercive power by weak actors (Molm, 1997). Reportedly, satisfaction from exchange relations is indicated by the frequency and distribution of exchanges and dependent on relative power-ratios given that a more symmetrical distribution or higher frequency of transactions ensues from greater average power or power balance. In short, level of satisfaction in exchange is linked with the high (low) expectations that higher (lower) power positions imply (Molm, 1991). Notably, reciprocal (vs. negotiated) exchanges lead to a more equitable distribution of power (or its lesser use) among actors in exchange networks (Molm and Peterson, 1999) and so perceptions of greater distributive justice (Molm et al., 2003).

In particular, relative power in exchanges is associated with the degree and measures of centrality of actors’ positions (Bonacich, 1987; Friedkin, 1991) in influence networks (Friedkin, 1999), though this association does not rule out situations where greater power may not accrue to central positions (Cook and Yamaguchi, 1990; Markovsky et al., 1990; Willer, 1986). Overall, power is assumed to be a dependent variable of positions or nodes rather than individual actions. Some alternative (e.g. identity) models of network exchange (Burke, 1997) instead associate power with participation in exchanges as dictated by a participation reference standard. In this view, power is not inherent to network positions but represents the ability of some actors to control resources that the others pursue, which indicates two parts to the equation. 6

As hinted, some of its prominent advocates (Emerson, 1976; Homans, 1990) regard exchange theory’s main assumptions as derived from or isomorphic to those in conventional economics (utility seeking) and behaviorist psychology (reward-punishment). In this view, these do not represent macro-sociological or structural assumptions in that they eschew the structure and functioning of whole societies (Homans, 1971). Justification for relying on the assumptions of individual psychology is that no general sociological propositions exist that hold for all societies and social groups, except those of psychological nature or provenience 7 . Notably, some behaviorist sociologists argue that in virtue of its methodological (or ontological) individualism, rational choice, including social exchange, theory is an application of behavioral psychology, since to say that the former’s propositions refer to individual actions is to state that they are psychological, not sociological (Homans, 1990: 81). This signifies subsuming the “economic approach to non-economic social relations” or rationalist versions of social exchange theory, under behavioral psychology 8 on the ground that the latter includes the paradigm of rational action as a special case (Homans, 1969: 13). Simply, social exchange and all rational choice theory becomes no more than a “stripped-down version” of behaviorism (Homans, 1990: 85), though rational choice theorists (Coleman, 1990) strongly reject this view. If so, then behaviorism includes not only stimulus-response but also rational choice theories premised on the assumption of fixed and stable preferences (Smelser, 1997: 13). Moreover, in some views, rational choice “are in fact stimulus-response theories because they explain behavior on the basis of knowledge of individuals’ external circumstances (price, income, etc.)” (Smelser, 1997: 13-4).

The remainder of the paper presents outlines of an alternative social exchange. It also discusses the possible relevance of such social exchange theory for group processes and intergroup relations. A key argument is that groups just as individuals represent exchange agents as well as that economic exchanges, particularly market transactions, are only one of the multiple forms and facets of within-group processes and between-group relations.

Toward AN Alternative Theory OF Social Exchange

Outlines of a Multilevel Social Exchange Theory Premised

This section of the paper outlines a different and more satisfactory multilevel social exchange theory predicated on the perspective of a sociological social psychology (Cook, 2000; Markovsky, Smith and Berger, 1984; Stolte et al., 2001), or psycho-sociology. This perspective stresses the macro-social or structural underpinnings of micro-level or individual behaviors, including exchange relations (Blau, 1994), and the overall co-determination between structure and agency. The differentia specifica of this social exchange theory is in that it is based on or generative of a model with multivariate as well as its micro-macro properties (as illustrated by a simple multiple regression equation 10 ). This model rectifies or relaxes bivariate, rational choice and behaviorist models of social exchange in their single-factor assumptions. By including a single class of explanatory economic variables like wealth, with the exclusion of others (or reducing them to “utility”), rational choice models are bivariate (or causally univariate) 11 . Such bivariate rational choice models appear overly simplistic, mono-factorial, uni-dimensional and mis-spelled in the light of the actual multiplicity of explanatory variables in social exchange. Since they commit the fallacy of mono-causality, reductionism, and mis-specification, this greatly diminishes their methodological-empirical adequacy. Likewise, by positing a single class of explanatory psychological variables—e.g. mutual reinforcement, reward, stimuli, reciprocal gratification, etc.--behavioral models of social exchange also appear bivariate 12 , thus committing the same fallacy as their rational choice counterparts. To the extent that they explain social exchange by a single set of explanatory variables, rational choice and behaviorist models look like causally univariate explanations of a multivariate phenomenon. In formal terms, they are methodologically deficient, especially econometrically mis-specified, and no clause of ceteris paribus, procedure of abstraction or first approximation can remedy or justify that. In theoretical terms, they are unable to provide substantively plausible explanations of social exchange.

A sensible alternative to such methodologically-theoretically untenable models is a multivariate model of social exchange, which includes economic and non-economic, behavioral and cultural, individual and structural variables alike. For the sake of outlining a multivariate model of social exchanges, several classes of explanatory factors can be considered to exhaust or approximate these variables. For terminological convenience, these classes may be called economic, political, social and cultural capital, respectively. However, the term “capital” is not appropriate for non-economic variables because of its original and prevalent economic-financial connotation, viz. the principal of a monetary loan (capitalis) and thus a synonym for a sum of money bringing interest, as some neoclassical economists (e.g. Böhm-Bawerk) note. Thus (as another neoclassical economist, Wicksell put it), the term capital “was originally understood to mean a summation of money lent, capitals pars debiti-- the principal of a loan as opposed to interest”. Also, Weber observes that, for example, in medieval Italy, reportedly the property or assets of the firm (corpo della compagnia) evolved into the concept of capital. Hence, insofar as in social exchange (and rational choice) theory the capital concept becomes a weak figure of speech rather than potent and precise tool (DiMaggio, 1979: 1468), it should be avoided or used as a metaphor at best 13 (Baron and Hannan, 1994).

Also, combined micro-macro properties underlie a multivariate model of social exchange. These properties contrast with those of most current models of social exchange, which are micro-only, such as rational choice and behavioral ones, and to that extent unidimensional and partial. Such a micro-macro model assumes that exchanges, including their economic modes, can obtain not only between individuals as in rational choice and behavioral models but also among social groups--i.e., as intergroup, including inter-organizational, relations--as well as total social systems or societies. This suggests that exchange actors in a micro-model are both individual and collective, i.e. individuals as well as social groups (organizations or corporations), and societies, thus expressing both within- and between-group processes.

Finally, comparative-historical properties characterize a multivariate, micro-macro model of social exchange, as indicated by its ability to take into account variations in economic and other exchanges across historical time and social space. For illustration, the model attempts to compare and juxtapose to each other such historical or actual exchange systems as traditional and modern, capitalist and non-capitalist, developed and underdeveloped, etc. It examines and contrasts both variations between comparative exchange systems and those within each of them. In doing so, it contrasts with the ahistorical and non-comparative (parochial) character of rational choice, behavioral and other bivariate, micro models of social exchange 14 (Alexander, 1998). A next section attempts to empirically evaluate this multivariate, micro-macro, and comparative-historical model of social exchange.

The Empirical Relevance of Social Exchange Theory

This section tries to estimate the empirical significance of the multivariate model of social exchange outline above by presenting some indicative research findings. A considerable number of empirical results do not support, and some even “falsify” (in the sense of stringent falsificationism a la Popper), bivariate rational choice and behavioral models of social exchange, as some of their exponents concede. However, since for the latter no better model is available, they do not see this weak empirical support as a sufficient reason for discarding their models. While admitting that a problem with rational-choice exchange theory is that many empirical studies falsify it, they suggest that it should only be rejected if a better one is available (Opp, 1989: 254) and argue that such an alternative is not be found yet (Kiser and Hechter, 1998). As illustrated below by some indicative cases, most empirical studies support a multivariate, micro-macro, comparative-historical model of exchange over rational choice-behavioral models, despite some efforts (Hechter and Kanazawa, 1997) to find supportive evidence for the latter.

Social Exchange and Empirical Research

This section first reexamines the empirical significance of rational choice models of a special case of social exchange such as political exchanges and processes. The rational choice model of political exchanges, called public/social choice theory or an economic paradigm of politics, has generated various anomalies or paradoxes that empirical research, everyday observation and common-sense admittedly expose (Margolis, 1982: 17-21). Cases in point are the paradoxes of individual voting, public contribution, political participation, selective incentives in collective action (Pappalardo, 1991) and related phenomena of political exchange (Perrone, 1984). These paradoxes reportedly become theoretical and methodological “pathologies” of the rational choice model of political phenomena (Miller, 1997). For instance, some empirical studies find relevant evidence for a causal linkage between social associations and voting turnout (Olsen, 1972), contrary to the individualistic-economic explanation of (non)voting given by the rational choice model of political behavior. In postulating that for individuals it is not rational to vote, the model neglects the observation that voting is often explained by multiple sociological factors, ranging from citizen duty or civic responsibility to social networks to power and cultural factors. Reportedly, the rational choice model by transplanting the economic concept of rationality cum pursuit of self-interest or utility maximization to political behavior fails to explain high levels of turnout in elections, especially in Europe (Schneider, 1994: 180). Admittedly, while in cost-benefit terms irrational for individuals, voting is a rational act from the prism of the producers of collective pressure, as social groups and expectations play a key role in the individual’s decision to vote as an act of political exchange between the electorate and officials (Schram and Winden, 1994: 247). Alternatively, the evidence for the salience of multiple sociological variables in voting supports a multivariate model of social exchange.

Also, empirical evidence is less supportive of the rational choice than of the multivariate model of collective political action, including participation in social movements. As shown for the Civil Rights Movement, participation in social movements is prompted not only by rational planning and cost-benefit calculations, but also by spontaneity, emotions, ideals, personal ties and networks, emergence and a myriad of other non-rational elements (Killian, 1984). Other studies (Klandermans, 1984) present evidence that expectations of others’ participation in social movements or their anticipated actions 15 rather than individual cost-benefit calculations act as self-fulfilling prophecies through collective definitions of situations. Reportedly, contrary to the free-rider hypothesis of rational choice, individual calculations become irrelevant, since though these expectations need not be realistic, they can be real in their aggregate unintended, even perverse effects (Boudon, 1982), thus confirming the Thomas theorem of irrational, including paranoid, social behavior (Merton, 1995).

Various other empirical studies find that the free-rider problem is largely impertinent relative to the salience of a multiple social variables in political behavior. For instance, a study of the Dutch Peace Movement of 1985 reports that the free-rider problem is not a major obstacle to collective political action like social movement mobilization (Oegema and Klandermans, 1994). Instead, reportedly the formation of mobilization potential, creation and activation of recruitment networks, arousal of motivation to participate, and removal of barriers to participating are major variables in movement participation (Klandermans and Oegema, 1987). Even a study starting from a rational-choice (resource-mobilization) perspective, identifies a multiplicity of social pseudo-rational variables--e.g. recruiting attempts, the link of movement and group identity, support for the link from group members, and lack of opposition from relevant outsiders--as critical in collective action vs. individual cost-benefit calculi (McAdam and Paulsen, 1993). Also, the reported relevance of the process of framing (in Goffman’s sense) in movement participation corroborates a complex multivariate rather than simple rational choice model of collective action (Snow et al., 1986), because this process rests on a variety of sociocultural variables, including symbols, social perceptions, expectations, rules or conventions, that differ from individual economic calculations. Reportedly, individual participation in social movements is underscored by frame alignment processes like frame-bridging, frame-amplification, frame-extension and frame-transformation (Snow et al., 1986). Even some researchers from the rational choice tradition report or imply that socio-cultural processes are often more important in such political activities than individual calculi of costs and benefits (Jasso and Opp, 1997; Opp, 1988). Admittedly, participation in social movements and other collective actions are chosen for a myriad of reasons, with those of public or non-economic character frequently dominating their individual or economic forms (e.g. East Germany’s 1989 revolution).

Also, some studies (Snyder, 1975) of other forms of collective action as strikes suggest that a multivariate sociological perspective is more plausible in this regard than the rational choice model, including the bargaining hypothesis of unions. As reported, in their decisions to strike workers do not just resort to accurate computations of economic costs and benefits, since these actions are (also) more affected by extra-economic factors. The operation of such social, especially political and status, variables transform strikes from instruments of economic (labor-capital) exchange to potent weapons in political (working class-state) conflict. Notably, the conversion of strikes from a form of economic bargaining to a political means to achieve power is evidenced in the incidence of externalities in this collective action (Perrone, 1984). Thus, the effects of strikes shift from the economic to political realm when the benefit is not attributed to market power, so they evolve from a local menace to profit to a general threat to the social order. In this view, the transformation of strikes from economic to political phenomena is evidenced by their increasingly disruptive potential vis-à-vis the polity and social system as a whole, with the positional power of actors (labor vs. capital) being determined by such potentials. As empirical research (Wallace, Griffin and Rubin, 1989) suggests, linking the positional power of labor (vs. capital) with its disruptive potential implies that it is ultimately rooted in the structural relations of production. Hence, labor-capital outcomes, including workers’ position in the market, and the organizational capacity and militancy of unions, are decisively affected by its positional power. Historically, in societies like the US union membership and mobilization have been reportedly more influenced by various collective factors, especially the link of class conflict with social movement, as well as the counter-mobilization of adversaries than individual cost-benefit calculations (Griffin, Wallace and Rubin, 1986).

Generally, many critics object that explaining processes within and between ethnic, racial, religious, artistic, ideological, and other non-economic collectivities is a particularly weak spot of rational choice models of exchange, given their individualistic and economistic bias. And when these models deal with processes in such collectivities, they do so in an incomplete and inadequate manner, as shown by the following example. Some of its advocates claim that a single, rational choice model can explain exchange and other social processes, including group cohesion, in both traditional community or Gesellschaft and modern society or Gemeinschaft (Hechter and Kanazawa, 1997). Prima facie, it seems questionable to subsume both types of society under a single overarching rational or utilitarian principle, given the essential differences between the two, as Marx, Tönnies, Durkheim, Weber, Simmel and others classically argue and demonstrate. In light of their arguments and demonstrations, the claim that Gemeinschaft is based on the same principle as Gesellschaft is probably a historical simplification. Moreover, not only Gemeinschaft as an essentially non-rational social system in purely economic terms, viz. Weber’s status society, Gesellschaft itself is not fully governed by some rational-choice laws. For example, “in our gesellschaftlich social life, we rarely plan in 20-year segments” (Stinchcombe, 1990: 214-215), which implies a degree of time preference or discounting the future (Simon, 1976: 64-66), as a variation on the theme that “in the long run we all dead”, or that the long term is a sequence of short-term steps (Galbraith, 1997: 96). Since for individuals the fact of having time preferences is irrational (Elster, 1979: 67), this typical depreciation of the future implies non-rationality in Gesellschaft, with (or if) rationality presupposing forward-looking behavior. . fortiori, historical studies examining the determinants of group integration and survival in various American communes from the 18th and 19th century admittedly (Hechter, 1990) do not corroborate rational choice explanations or interpretations of Gemeinschaft. Reportedly, success in group integration and survival seem to hinge less on rational economic factors than on others: For example, the factors unrelated to successful group existence include economic variables as financial contribution, and those related to it non-rational ones like ethnicity (Hechter, 1990), though rational choice theorists tend to rationalize the latter and other economically irrational forces via tortuous logic (Knoke, 1988).

Overall, since group formation and existence, especially of non-economic groups, is proved to be a complex process involving multifarious social factors, a single-factor, rational choice model fails to do justice to the phenomenon. For example, a study (of Quebec) shows that social conditions, especially the sociocultural construction of ethnic relations perceived as unfair and a societal context of ethnics’ independence, are more important than economic factors in group competition and/or open conflict (Belanger and Pinard, 1991). Other cases in point include (inter)ethnic exchange, competition, and related conflicts in the former Yugoslavia and Soviet Union, where collective charisma, effervescence and other non-rational forces (Tiryakian, 1995), as well as macrostructural conditions (Collins, 1995) have been prime (though not only) movers in these processes rather than rational individual cost-benefit calculations.

In addition to its treatment of politics as a “political marketplace”, empirical studies also challenge the adequacy of the rational choice model of marriage or non-economic markets as isomorphic to economic ones, thus to the exchange of material goods and capital. A study shows that these are not genuine “markets” but sets of matches anchored in culture similarity rather than generalized exchanges of resources, thus suggesting that cultural “capital” is more important than economic factors (DiMaggio and Mohr, 1985). If so, then extra-economic criteria like cultural or symbolic “capital” play a greater role than economic ones in assortative mating, as a presumed hallmark of marriage “markets”, which is a correct interpretation of the finding of its increase in the U.S. from the 1930s to 1980s (Mare, 1991). Also, a study (Steelman and Powell, 1991) shows that in family, including parent-children, relations economic rationality simply may not operate, thus supporting Simmel’s proposition, implicit in a multivariate model, that when people “exchange love for love” they do not sacrifice material goods or make cost-benefit calculations. Another study (Pescosolido, 1992) examines family-linked interactions, such as mutual help-seeking, and infers that rational choice models fail to account for essential features of social exchange. A key reason for this failure is their overlooking or playing down the social setting within which individual exchanges take place and are sustained. In this view, rational choice models fail to establish micro-macro links in that they center on individual action cum optimizing in exchange and de-center on social structure, which requires a different framework as a corrective.

One may expect that the rational choice model will be validated in market exchange as its original realm of application and validation. However, even in this realm the model is not necessarily superior to a multilevel sociological theory of market exchange based in economic sociology, including that of markets (Lie, 1997); on the contrary, as shown below.

Market-Economic Exchange.

Anthropological and historical research supports the principle of social-cultural construction of economic exchange, including its non-market modes. Reportedly, in contemporary simple societies the “reproduction of social and ideological systems” (Parry and Bloch, 1989:1-2) underscores and includes as a constituent component the pattern of economic exchanges. As Polanyi shows, the overriding concern with establishing and nurturing social connections, the emphasis on intrinsic (non-material) motivation and the salience of what he calls “sociological compass” composed of magic, religion, custom, etc. define traditional societies. In brief, the economy is an integral and secondary element of a primary socio-cultural matrix, thus, as he put it, “being embedded in social relations”. Notably, Polanyi observes that in traditional society economy is an “instituted process” in virtue of being “embedded and enmeshed in a variety of [social] institutions”. Particularly, research reports that in traditional societies pursuit of private goals has a tendency to become accessory in relation to the social interest since the community satisfies its members’ necessary or economic needs. In turn, violations of the shared code of social honor and generosity are sanctioned by excommunicating transgressors from the society as outcasts. A key cognate principle regulating economic exchange and other social relations in traditional societies is the norm of reciprocity or mutualism. Contrary to the standard economic axiom of a natural propensity to exchange for profit, including “self-seeking with guile”, moral norms of reciprocity reportedly govern economic exchange and all social life in today’s primitive societies (Parry and Bloch, 1989: 77). Anthropological and other research (Geertz, 1992; Kranton 1996) also finds that people establish and sustain exchange relationships based on reciprocity (gift exchanges) rather than markets in some modern developing societies (e.g. Oriental bazaar economies like Egypt). Consequently, some anthropologists (e.g. Humphrey and Hugh-Jones, 1992) propose abandoning the notion of natural propensities as an explanatory variable of exchange and related economic phenomena in favor of cultural and institutional explanations. In this view, it is impossible (even analytically) to separate economic actors from “culturally defined intentions” (Humphrey and Hugh-Jones, 1992: 13), for individuals, their wants and modes of exchange are subject to a process of socio-cultural formation. For instance, Weber observes that in early traditional societies with agricultural economic structure the material life of individuals rests on their membership in the community to the effect that the “credit of the individual is normally the credit of his clan”. In terms of Polanyi’s taxonomy of economic exchange, (economically) non-rational principles of such non-market modes as reciprocity and redistribution dominate the rationality principle attributed to the market mode. Notably, reciprocal exchange and redistribution (e.g. collection, storage and division of goods) rest on certain institutional-cultural patterns, viz. what he denotes as symmetry and centricity, respectively, which shape individual economic behavior in traditional societies. Given that social structure incorporates the economy as an integral element and function, no significant shirking of personal effort, for example, can reportedly be found in these societies (Firth, 1961: 122).

Further, anthropological and sociological studies evidence the socio-cultural constitution and historical specificity of market exchange itself. As one of these studies finds (Fiske, 1991), market pricing or price contracting far from being a cultural universal is just one among a wide range of modes of social relations, including economic transactions, in today’s simple and even some complex societies (e.g. Japan). Specifically, these societies also contain such modes of socio-economic relations as authority ranking, community sharing, and equality matching that are irreducible to market-pricing, as all these feature variability in their cultural specification (Fiske, 1991: 392). In historical terms, societies reportedly vary widely in their attitude (e.g. esteem or disdain) to economic exchange, coupled with the fact that market-pricing is not the exclusive mode of production, distribution and exchange of material goods (Fiske, 1991: 396). An important reason for the inconvertibility of non-market modes of social relations to that of the market is that the exact determination of exchange value or money price in the former is difficult or impossible in contrast to the latter. Thus, authority ranking, community sharing, and equality matching are observed to entail no mechanisms functionally equivalent to markets for determining exchange values, especially monetary prices (Fiske, 1991: 374).

Other empirical studies also suggest that multiple non-economic variables have strong influences on rational choices in market exchanges. As shown in examining the development of market relations in such diverse countries like England and Japan, sociological variables like class divisions, power hierarchy, and status distinctions have been of primary importance in this process relative to individual utility maximization (Lie, 1992). Another investigation (Hamilton and Biggart, 1988) reports similar findings for East Asia (Korea, Taiwan and Japan): the role of economic factors vis-à-vis social forces like power has been secondary in the development of market organization. Its conclusion is that market exchange cannot always be accounted for by strictly rational variables like profit or efficiency because these produce narrow explanations, thus supporting a broader multivariate model.

In addition, empirical studies evidence the multiple social determination of labor market as opposed to its economic mono-causation assumed in rational choice models of exchange. One of these studies (Sakamato and Chen, 1991) find this model, with its assumptions of perfect competition, equilibrium, and utility maximization in labor markets, inferior to a sociological framework that focuses on their organizational constraints on and institutional embeddedness. So does another study (Hodson and Kaufman, 1982) observing that labor markets are not just direct reflections of capital or financial factors, but autonomous structures of labor resources and liabilities, as determined by the constraints of power constellations and other social relations, not only market competition. This study suggests that simple economic models of labor markets are incomplete and mis-specified relative to a multivariate model in that they overemphasize only one aspect of market exchange while neglecting its manifold sociological dimensions.

The preceding indicates that a variety of social and cultural constrains impinge on market-economic exchange, and labor markets in particular. For instance, moral judgments are reportedly critical in labor-capital exchanges or income distribution, as evidenced by couching the rhetoric of disputes over earnings in terms of justice or fairness (Smith, 1990: 840). This contradicts the underlying unfairness hypothesis of standard economics, including its rational choice model, which assumes that economic (and other) actors try to maximize utility regardless of ethical considerations (Thaler, 1994) by engaging in a sort of Machiavellianism as a set of “behaviors that involve manipulating others in one’s own interest and at cost to others” (Bowles, Gintis and Osborne, 2001). As a way of relaxing this neo-Machiavellian hypothesis, social exchange theory introduces that of distributive justice or fairness (Molm, Peterson, and Takahashi, 2003) as just an admittedly ad hoc hypothesis (Coleman, 1988) serving to mitigate the failure of the core rational-choice premise of reckless (“consistent”) pursuit of self-interest.

That social structure, notably embeddedness in interpersonal networks and institutional arrangements, is a main factor in the organization and behavior of economic actors, including organizations, is the general finding of empirical research on market exchange (Burt, 1988). For instance, a study presents evidence that intra- and inter-organizational transactions are governed not only by the price or market mechanism but also by power or hierarchical methods, both operating in interdependence, contrary to the rational choice model treating them as isolated, as alternative and socially empty mechanisms (Eccles and White, 1988). Another study (Fligstein and Brantley, 1992) suggests that a political-cultural model of market exchange provides a better account of the patterns of organizational actions than does an economic approach in that the former envisions the impact of competing attempts at social control on efficacy rather than just defining strategies ex post as does the latter. For example, it finds that ownership or financial constitution is of secondary importance in these exchange processes relative to organizational or institutional embeddedness.

Empirical research also corroborates the Simmel-Weber assumption, as implied in a multivariate model, that money, profit, exchange value, price and related phenomena are not just pure market variables, but also what Weber calls “sociological categories of economic action” in virtue of being acted upon by sociocultural factors. For illustration, a study exposes the limits of an economic model of market money and monetary value showing that these are intertwined with historically variable systems of meanings and structures of social relations rather than fully autonomous (Zelizer, 1989). Similarly, another study reports that accounting as calculation in money has often been a rhetorical device rather than an instrument of economic rationality in exchange because of the prevalence of its social, especially symbolic, dimensions relative to the rational in the development of modern capitalism (Carruthers and Espeland, 1991).

Still another study (Podolny, 1993) raises questions about the treatment of the market as a pure economic mechanism for efficient exchange, resource allocation, and price determination. As an alternative hypothesis, it proposes an (intended or unintended) outcome of the actions of economic agents is the market as a status order or exchange structure that is socially constructed. By contrast, most economists and rational choice theorists are disinclined to assume or observe such an exchange structure, because they tend to treat prestige in the market and society as but a means to achieve “efficiency gains” (Raub and Weesie, 1990) rather than, to paraphrase Veblen and Weber, “for its own sake”, as the Veblenian-Weberian argument and demonstration shows. Ironically, some studies by economists support the Veblenian-Weberian prestige hypothesis and cast doubt on the rational choice assumption of status seeking in the function of wealth or profit. One study finds that actors seek wealth or material gain not just for its consumption value or utility, but also for its resulting social status (Bakshi and Chen, 1996). Another study also shows that status considerations often motivate actors in market exchange, as evidenced by signaling wealth through Veblenian conspicuous consumption (Bagwell and Bernheim, 1996). In turn, a sociological study (Collins, 1990) indicates that macro-stratification in status, power and class terms is a historically constant tendency and influence in markets undergoing consequently a cycle of stabilization, expansion, and crises. Such tendencies are reportedly interrelated, as witnessed by the strong effects of non-economic, especially political-institutional factors, on crises in market exchange or downward phases of the trade cycle. (A case in point was probably the 1929-33 Depression, as leading economists like Keynes and Schumpeter noted.) In this view, the dynamic picture of markets is one of social structures subject to variations in openness and closure, thus to stratifying tendencies like unequal exchanges and economic inequality.

In sum, the preceding seems more supportive to a multivariate, micro-macro, and comparative-historical than a bivariate, micro-only, and ahistorical-noncomparative rational choice model of social exchange, economic and non-economic alike. The “original sin” is the rational choice model’s dissolution of social into economic, structure (macro) into agency (micro), historical into perennial. Notably, it admittedly dissolves virtually all human values and motives into money profits and ordered utilities, social actors and structures into business units, explicit and implicit markets, and exchange networks (Willer, 1992).


The above considerations suggest that most of current social exchange theory represents a version of the rational choice approach (as protested by Blau, 1994) and/or behaviorism (as lamented by Coleman, 1988). This is indicated by the prevalence of economic and behavioral models, often mixed together (as in Homans, Emerson and their followers), of social exchange and human interaction. As admitted by some its exponents, modern exchange theory blends its “roots in behaviorism” with “concepts and principles borrowed from microeconomics” (Cook, 2000: 687), including wealth, utility, profit, cost, market, etc. If so, then the theory is parasitic on the place of economic determinism, utilitarianism, behaviorism and hedonism in modern social science, standing or (more likely) falling with them. The preceding has also outlined an alternative multilevel conception of social exchange along the lines of sociological social psychology in the sense of an analysis of co-determination between macro-processes, especially institutions, and individual behaviors, including exchanges. As regards market exchange, such a conception proposes that sociological influences admittedly “deeply affect the psychology underlying economic behavior [so] any serious reevaluation of the psychological underpinning of economics requires that careful attention be paid to sociological analyses. The sociological shortcomings [of economics] are much more fundamental and difficult to address [than the psychological]” (Lewin, 1996: 1294-1295).

Given its sources in orthodox economics and behaviorism—i.e. its nature as an extension of utilitarian-behavioral theorizing (Turner, 1987: 25) to the non-economic realm--social exchange theory finds itself under the mastery of homo economicus (Friedman, 1996) and in the “Skinner box” (as referred to Homans by Deutsch, 1971). Hence, the theory, like the model of market exchange in traditional economics or pure catallactics (Edgeworth’s term), suffers from problems that are in part psychological in character. For, as some economists admit, human actors “have a hard time doing what homo economicus does so easily: [optimizing, calculating]” (Blinder, 1997: 9). Like orthodox economics predicated on (in Edgeworth’s words) the theory of catallactics, despite some misgivings (Willer, 1992), much of exchange theory construes humans as representatives or descendants of an “anemic, one-dimensional homo economicus rather than as real-life flesh-and-blood dramatis personae” (Bowles, 1998: 78). In macro-terms, the theory conceives all society—constructed via aggregation or composition from such creatures and their actions--as a mere marketplace of profit optimization rather than, say, to paraphrase Weber, a complex (Shakespearian) societal stage of “Vanity” on which a Balzacian Human Comedy (or Tragedy), including a “gigantic potlatch” (Levi-Strauss, 1971), enfolds.

While social exchange theory, like the rational choice model, boils down to an extension of utilitarianism or economic reductionism (Hodgson, 1998) and behaviorism or hedonism rather than being an endeavor in the sociological-anthropological tradition, a more broadly conceived alternative is more in line with the latter. In particular, this alternative draws upon the classical insights of Durkheim, Weber, Marx, Simmel and other sociologists or anthropologists, combined as primary elements with, not displaced by, those of traditional economists and behaviorists as secondary ingredients. Prima facie, such a conception seems more grounded in social reality and history and thus has higher validity than current exchange theory, in which either its economics-style axiomatism (rational choice versions) is resistant to empirical testing, or its psychological experimentation (behavioral variants) is construed as evidence. As implied throughout the paper, a more empirically adequate theory of exchange uses the perspective of economic sociology. For illustration, in Weber’s rendition, economic sociology (Swedberg, 1998) or (what a neoclassical economist-admirer, Frank Knight, terms) sociological economics emphasizes the role of, as he puts it, “sociological relations in the economic sphere” and assumes that social structures and economy are “func-tionally related.” Notably, it posits that economy is affected by, as he puts it, the “autonomous structure of social action within which it exists”.

Applying this framework, economic exchange, including its market form, appears as a special case of social action (Weber) and interaction (Simmel). Such an application of economic sociology, especially sociology of markets, casts doubt on social exchange (and rational choice) theory’s treating of human inter-actions as economic-type or pseudo-market transactions. This treatment commits the fallacy of economic reductionism that on the admittedly spurious grounds of methodological parsimony (Hirschman, 1984) analytically disfigures reality in a misguided attempt at uncovering seductive market simplicity in a world of persisting social complexity. By contrast, with a view on this complexity, an exchange theory originating in economic sociology aims at “complicating” (Hirschman, 1984) rather than simplifying analysis. In the limiting case, to the extent that it conceptualize all social interaction as pseudo-exchanges of material resources, rewards, or utilities, like its rational choice parent, the social exchange paradigm can eventuate into a “theory of everything” (Hodgson, 1998: 168) claiming to explain “everything and nothing” (Ackerman, 1997: 663; Smelser, 1992: 403). If so, it becomes a sort of empty tautology (Friedman, 1996: 23), thus being useless (Knoke, 1988) for empirical research as well as substantive theory construction. On this account, social exchange theory in its rational choice and behavioral version belongs to (to cite Keynes) the “species of remedy which cures the disease by killing the patient.”

The rest of this section discusses the relevance of an alternative version of social exchange theory, along the lines of sociological social psychology, for group processes and intergroup relations. A key assumption of such an alternative is that not only individuals belonging to various social groups, but also these groups, viz., economic, political, cultural or kinship, can engage in exchange transactions as particular forms of group processes and intergroup relations. Hence exchange actors can be not only individuals, as usually assumed in current exchange theory, but additionally social groups or collectivities, including organizations and even societies. For example, group actors include corporations, business and consumer associations in market exchange, as well as governments, parties, interest groups, and citizen, families, kin groups and networks in social exchange, status groups or circles in social exchange, etc. In all these cases exchange transactions between various groups exemplify both within-group processes inducing or being induced by these transactions and inter-group relations associated with such processes.

Given the salience of group actors and processes in economic and non-economic exchanges, current social exchange theory commits a sort of fallacy of misplaced concreteness by claiming that agency can be the individual but not group, as presumably only individuals act. Such a claim is equivalent to the argument that since everything in nature can be reduced to them, atoms, molecules or particles are the only real phenomena of physics and chemistry. As regards the proclivity of most economists and rational-choice exchange theorists to conceiving economic exchanges and actors in solely individual terms, one can object that the economy, as Weber put it, “is not a mere aggregate of single economic [units], no more than its analogue, the human body is simply a mixture of chemical phenomena”.

Such proclivities, apart from violating this epistemological (or methodological) principle, distort an ontological reality of modern economies in which economic groups and organizations, especially corporations, are key agents in market exchange, just as production and distribution. Relatedly, overlooked is that economic exchange represents not just a purely market activity, but a complex social process involving groups and their interrelations, just as individuals and their interactions. Moreover, the individualist specification of exchange agents is not fully plausible for consumption as a presumed realm of individualism, given that most social groups are also consumers, including business corporations, political organizations, religious congregations, and other collectivities. In particular, the contemporary (welfare) state represents the biggest consumer or (as economic conservatives put it) spender. Further, the Weberian bureaucratic state has a tendency to constitute what he calls the “greatest entrepreneur in economic life” or “super-entrepreneur” (Khalil, 1999) not only in times of war but also in peacetime.

If so, then it is to misplace the concreteness of appearances like individual units and interactions for the underlying or alternative reality of groups and inter-group relations to say that economic collectivities are not genuine exchange agents, as implied in the principal-agent theory of economics. (Yet, curiously most economists subscribe to the “what is good for GM or Enron is good for America” equation, judging by their justification of mergers and related practices, including vertical integration, cum “free enterprise” on the grounds of firm efficiency.) This fallacy is due to the dubious presumption that only individuals within such collectivities engage in exchange transactions, but not the groups themselves dismissed as constituting some mysterious group mind or Hegelian collective entity. Consequently, such a presumption implies that the exchange system or market, like any economic (and other) group, is no more than a mere collection of individual agents representing their collective principals. However, even some staunch individualist economists (e.g. Hayek) describe the market as an “anonymous group”, particularly a social institution, rather than a simple sum of individuals.

Hence, an alternative social exchange theory economic treats collectivities as agents of market transactions in the same right as individuals, just as other social groups have the same role in non-market exchanges. For instance, in economic (and other) organizations group actors rather than single individuals make major investment decisions. Further, social-psychological research shows that groups, like individuals, have a tendency to persist in unsuccessful investments after initial expenses incurred, though in economic terms a rational course of action is to discontinue such projects, with this irrational behavior reflecting sunk-cost effects. As this research reports, alongside individuals, groups exhibit such behavior in that error-prone majorities, resorting to the sunk-cost representation of investments, are more powerful than rational minorities relying on considerations of economic rationality (gain-loss calculus).

In addition, collective economic entities engage in exchange transactions or, in Parsons’ words, boundary interchanges with other social groups by exchanging their output (goods) for the inputs of these, viz. labor, money and credit, and (entrepreneurial) knowledge provided by families, polities, and cultures, respectively. In turn, noneconomic groups are permeated by processes and engage in inter-group relations that have a social character transcending economic exchange; simply, such group interchanges are not mere markets. For instance, processes within and relations between political groups are mediated by power, domination or authority ranking rather than market pricing (Fiske, 1991: 13-16), wealth or money as the medium of economic exchange. In this view, other noneconomic groups such as kinship and communities are also reportedly more pervaded by processes and relations such as equality matching and communal sharing than market pricing.

Overall, various types of in-group processes and between-group relations, as a collective form of social exchange, can be mediated by certain generalized media. In addition to wealth (economic capital) and power (“political capital”) as the media of market and political exchange respectively, prestige, influence and ties (“social capital”) as well as symbols and knowledge of culture (symbolic-cultural “capital”) mediate extra-market processes within groups and relations between groups. Yet, it is but a metaphor or analogy to say that power, prestige, and symbols are, as Parsons call them, circulating media of group processes and intergroup exchanges of non-market character, just as wealth is the medium of those of economic nature. Notably, economic processes based on market transactions and political phenomena permeated by social dominance orientations-- thus mediated by wealth and power as their respective media--admittedly represent two distinct classes of phenomena (Coleman, 1986: 181).

The same applies to those economic and non-economic processes underscored by non-market exchanges and mediated by social prestige, especially in high-status groups. Not just individuals but also groups, including economic organizations, can and reportedly do (Podolny, 1993) seek social status or group approval as the universal human desire (Frank, 1996: 117). Further, pursuit of prestige (just as of power) by individuals or groups can admittedly come in conflict with that of wealth or economic objectives (Hechter, 1992), which suggests a trade-off between the two or opportunity costs. At this juncture, behaviorist-economic models of social exchange stressing some automatic or genetically based (“selfish genes”) seeking of monetary rewards and neglecting noneconomic types of incentives like esteem or “social utility” seem insufficient. Even under the (dubious) assumption that the inducement and conduct by such rewards is a purely psychological problem rather than institutionalized or socially learned motivation (Alexander, 1990), individual actions, like in-groups processes and intergroup relations, are not the same as (as Parsons objects to Homans) the behavior of rats and pigeons. In turn, prestige, influence, and networks of ties are largely a matter of processes in and relations between collectivities, especially status groups and cultural circles, and thus of societal construction and representation. In other words, if “social capital” represents a network of F-connections sustained by groups like families, friends and firms (Coleman, 1994: 169-177), then it is an outcome or expression of certain features of these groups’ structure like network openness or closure, continuity and multiplexity of in-group processes, etc., as well as their interlocking relations. In sum, actors in social exchange can be individual and group alike. And within-group processes and inter-group relations cannot be subsumed under economic exchange, especially market transactions, since they involve social exchange and generally noneconomic phenomena as well.


The preceding discussion suggests that exchange and related concepts borrowed from orthodox economics--viz., non-economic (marriage, political, religious, intellectual) markets, social capital, psychic income, profit, cost-benefit, investments--are metaphors or analogies at best. Yet, in its rational choice (and behavioral) rendition, “social exchange” becomes an empty concept or pseudo-mathematic trick emptied of any substantive content (Margolis, 1982: 16), just as an overarching mono-utility function (Etzioni, 1999) or cost-benefit model (Elster, 1998) spuriously homogenizes diverse human goals, preferences and affects 16 into a single measure or unit (“utility”) that is content-empty.

Hence, at the heart of the problematic character of social exchange theory is that their advocates “do not always theorize exchange [but] rather than explaining markets and exchange, they employ markets or exchange to explain social and economic life” (Lie, 1997: 343). The conceptual derivative of such theorizing is human society cum an all-embracing marketplace inhabited by actors engaged in consistent optimization of utility-disutility (rational choice) or reward-punishment (behaviorism), thus propelled by “inborn” economic-hedonistic propensities to exchange and to seeking pleasure and avoiding pain. Admittedly, social exchange theory is deliberately and essentially a market-economic framework for approaching noneconomic phenomena by suggesting, for instance, that group pressure and member conformity are to be regarded as “two sides of a transaction involving the exchange of utility or reward” (Emerson, 1976; 336). In general, the theory “adopts the basic behavioral assumptions of operant psychology and utility theory in economics regarding utility maximization, rationality, learning and deprivation-satiation” (Baron and Hannan, 1994: 1133). In particular, the rational choice model provides the “basis” (Cook, 2000: 687) for much of modern social exchange theory (for a review cf. Stolte et al., 2001).

Such an economistic-behaviorist conceptualization of social action and society suggests that omni-potent (in terms of scope) market concepts, such as exchange or rational (including public) choice, do not represent always theories of the market. This holds good to the extent that these theories do not always theorize the latter, but tend to apply market laws and reasoning to all social domains (Lie, 1997: 343-345), thus trying to create assort of imperial Benthamite social science (Lewin, 1996: 1299). A theory of markets performs description and explanation of the character and operation of market variables, processes and structures like prices, demand, supply, exchange, competition, monopoly, etc. in their economic and societal framework rather than construing non-market categories as “markets”, human interaction as “exchange” of rewards or economic competition, as does social exchange (and other rational choice) theory. On this account, much of current social exchange theory, especially its rational-choice formulation, appears as a questionable interpretation and expansion of the orthodox model of economic exchange, especially what neoclassical economists like Edgeworth call catallactics understood as the theory of a “perfect market.”


Ackerman, Frank (1997). Consumed in Theory: Alternative Perspectives on the Economics of Consumption. Journal of Economic Issues 31: 651-664.

Alexander, Jeffrey (1990). Structure, Value, Action. American Sociological Review 55: 339-345.

______ (1998). Neofunctionalism and After. Oxford: Blackwell Publishers.

Bagwell, Laurie and Douglas Bernheim (1996). Veblen Effects In A Theory Of Conspicuous Consumption. American Economic Review 86: 349-373.

Bakshi, Gurdip and Zhiwu Chen (1996). The Spirit Of Capitalism And Stock-Market Prices. American Economic Review 86: 133-157.

Baron, James and Michael Hannan (1994). The Impact of Economics on Contemporary Sociology. Journal of Economic Literature 32:1111-46.

Belanger, Sarah and Maurice Pinard (1991). Ethnic Movements And The Competition Model: Some Missing Links. American Sociological Review 56: 446-457.

Blau, Peter (1964). Exchange And Power In Social Life. New York: John Wiley & Sons.

______ (1994). Structural Contexts Of Opportunities. Chicago: The University of Chicago Press.

Blinder, Alan (1997). What Central Bankers Could Learn From Academics--And Vice Versa. Journal of Economic Perspectives 11: 3-19.

Bonacich, Philip (1987). Power And Centrality: A Family Of Measures. American Journal of Sociology 92: 1170-1182.

Boudon, Raymond (1982). The Unintended Consequences Of Social Action. New York: St. Martin’s Press.

Bowles, Samuel (1998). Endogenous Preferences: The Cultural Consequences Of Markets And Other Economic Institutions. Journal of Economic Literature 36: 75-111.

Bowles, Samuel, Herbert Gintis and Meliss Osborne (2001). The Determinants of Earnings: A Behavioral Approach. Journal of Economic Literature 39: 1137-1176.

Burke, Peter (1997). An Identity Model For Network Exchange. American Sociological Review 62: 134-150.

Burt, Ronald (1988). The Stability Of American Markets. American Journal of Sociology 94: 356-395.

Carruthers, Bruce and Wendy Espeland (1991). Accounting For Rationality: Double-Entry Bookkeeping And The Rhetoric Of Economic Rationality. American Journal of Sociology 97: 31-69.

Coleman, James (1986). Social Theory, Social Research, And A Theory Of Action. American Journal of Sociology 91: 1309-1335.

______ (1988). Social Capital In The Creation Of Human Capital. American Journal of Sociology 94: S95-S120.

______ (1990). Foundations Of Social Theory. Cambridge: Belkhap Press.

______ (1994). A Rational Choice Perspective On Economic Sociology. Pp. 166-182 in Handbook of Economic Sociology. Smelser Neil and Richard Swedberg (Eds.). Princeton: Princeton University Press.

Collins, Randall (1990). Market Dynamics As The Engine Of Historical Change. Sociological Theory 8: 111-1135.

______ (1995). Prediction In Macrosociology: The Case Of The Soviet Union. American Journal of Sociology, 100: 1552-1590.

Cook, Karen (1990). Linking Actors And Structures: An Exchange Network Perspective. Pp. 115-128 in Structures Of Power And Constraint. Calhoun, Calhoun, Marshall Meyer and Richard Scott (Eds.). Cambridge: Cambridge University Press.

______ (2000). Charting Futures for Sociology: Structure and Action. Contemporary Sociology 29: 685-692.

Cook, Karen and Toshio Yamaguchi (1990). Power Relations In Exchange Networks. American Sociological Review 55: 297-300.

Curtis, Richard (1986). Household And Family In Theory Of Inequality. American Sociological Review 51: 168-183.

Deutsch, Michael (1971). Homans in the Skinner box. Pp. 87-108 in Institutions And Social Exchange. Turk Herman and Richard Simpson (Eds.). Indianapolis: Bobbs-Merril.

DiMaggio, Paul (1979). Review Essay: On Pierre Bourdieu. American Journal of Sociology 84: 1460-1474.

DiMaggio, Paul and John Mohr (1985). Cultural Capital, Educational Attainment, And Marital Selection. American Journal of Sociology 90: 1231-1261.

Eccles, Robert and Harrison White (1988). Price And Authority In Inter-Profit Center Transactions. American Journal of Sociology 94: S17-S51.

Elster, Jon (1979). Ulysses And The Sirens. Cambridge: Cambridge University Press.

______ (1998). Emotions And Economic Theory. Journal of Economic Literature 36: 47-74.

Emerson, Richard (1962). Power-Dependence Relations. American Sociological Review 27: 31-41.

______ (1969). Operant Psychology And Exchange Theory. Pp. 379-408 in Behavioral Sociology. Burgess Robert and Don Bushell (Eds.). New York: Columbia University Press.

______ (1976) Social Exchange Theory. Annual Review of Sociology 2: 335-362.

Etzioni, Amitai (1999). Essays in Socio-Economics. New York: Springer.

Fararo, Thomas (2001). Social Action Systems. Westport: Praeger.

Fiske, Alan (1991). Structures Of Social Life. New York: Free Press.

Fligstein, Neil and Peter Brantley (1992). Bank Control, Owner Control, Or Organizational Dynamics: Who Controls The Large Modern Corporation. American Journal of Sociology 98: 280-307.

Frank, Robert (1996). The Political Economy Of Preference Falsification. Journal of Economic Literature 34: 115-123.

Frey, Bruno, and Felix Oberholzer-Gee (1997). The Cost Of Price Incentives: An Empirical Analysis Of Motivation Crowing-Out. American Economic Review 87: 746-755.

Friedkin, Noah (1991). Theoretical Foundations For Centrality Measures. American Journal of Sociology 96: 1478-1504.

______ (1999). Choice Shift and Group Polarization. American Sociological Review 64: 856-876.

Friedman, Jeffrey (Ed.) (1996). The Rational Choice Controversy. New Haven: Yale University Press

Galbraith, John (1997). Time to Ditch the NAIRU. Journal of Economic Perspectives 11: 93-108.

Geertz, Clifford (1992). The Bazaar Economy: Information And Search In Peasant Marketing. Pp. 225-232 in Sociology Of Economic Life. Granovetter Mark and Richard Swedberg (Eds.). Boulder: Westview Press.

Goodfellow, D.M. (1939). Principles Of Economic Sociology. London: Routledge.

Griffin, Larry, Michael Wallace and Beth Rubin (1986). Capitalist resistance to the organization of labor before the New Deal: Why? How? Success? American Sociological Review 51: 47-67.

Hamilton, Gary and Nicole Biggart (1988). Market, Culture, And Authority. A Comparative Analysis Of Management And Organization In The Far East. American Journal of Sociology 94: S52-S94.

Hechter, Michael (1990). The Attainment Of Solidarity In Intentional Communities. Rationality and Society 2: 142-155.

______ (1992). Should Values Be Written Out Of The Social Scientist’s Lexicon? Sociological Theory 10: 214-230.

Hechter, Michael and Satoshi Kanazawa (1997). Sociological Rational Choice Theory. Annual Review of Sociology 23: 191-214.

Hirschman, Albert (1984). Against Parsimony: Three Easy Ways of Complicating Economic Discourse. American Economic Review 74: 89-96.

Hodgson, Geoffrey (1998). The Approach Of Institutional Economics. Journal of Economic Literature 36: 166-192.

Hodson, Randy and Robert Kaufman (1982). Economic Dualism. American Sociological Review 47: 727-739.

Homans, George (1961) Social Behavior. New York: Harcourt, Brace & World.

______ (1969). The sociological relevance of Behaviorism. Pp. 9-28 in Behavioral Sociology. Burgess Robert and Don Bushell (Eds.). New York: Columbia University Press.

______ (1971) Bringing Men Back In. Pp. 109-127 in Institutions And Social Exchange. Turk Herman and Richard Simpson (Eds.). Indianapolis: Bobbs-Merril.

______ (1990) The Rational Choice Theory And Behavioral Psychology. Pp. 77-90 in Structures Of Power And Constraint. Calhoun, Calhoun, Marshall Meyer and Richard Scott (Eds.). Cambridge: Cambridge University Press.

Jasso, Guillermina and Karl-Dieter Opp (1997). Probing The Character Of Norms. A Factorial Survey Analysis Of The Norms Of Political Action. American Sociological Review 62: 947-964.

Khalil, Elias (1999). Two Kinds of Order: Thoughts on the Theory of the Firm. Journal of Socio-Economics 28: 157-173.

Killian, Lewis (1984). Organization, Rationality And Spontaneity In The Civil Rights Movement. American Sociological Review 49: 770-783.

Klandermans, Bert (1984). Mobilization And Participation: Social-Psychological Expansions Of Resource Mobilization Theory. American Sociological Review 49: 583-600.

Klandermans, Bert and Dirk Oegema (1987). Potentials, Networks, Motivations, And Barriers: Steps Toward Participation In Social Movements. American Sociological Review 52: 519-531.

Knoke, David (1988). Incentives In Collective Action Organizations. American Sociological Review 53: 311-329.

Kranton, Rachel (1996). Reciprocal Exchange: A Self-Sustaining System. American Economic Review 86: 830-851.

Lane, Robert (2000). The Loss Of Happiness In Market Democracies. New Haven: Yale University Press.

Lawler, Edward (2001). An Affect Theory of Social Exchange. American Journal of Sociology 107: 321-352.

Levi-Strauss, Claude (1971). Les structures elementaires de la parente. Paris: Mouton & Co.

Lewin, Shira (1996). Economics And Psychology: Lessons For Our Own Day from the Early Twentieth Century. Journal of Economic Literature 34: 1293-1324.

Lie, John (1992). The Concept Of Mode Of Exchange. American Sociological Review, 57: 508-523.

______ (1997). Sociology Of Markets. Annual Review of Sociology 23: 341-360.

Macy, Michael and Andreas Flache (1995). Beyond Rationality In Models Of Choice. Annual Review of Sociology 21: 73-92.

Margolis, Howard (1982). Selfishness, Altruism, And Rationality. Cambridge: Cambridge University Press.

Markovsky, Barry, Le Roy Smith and Joseph Berger (1984). Do Status Interventions Persist? American Sociological Review 49: 373-382.

Markovsky, Barry, David Willer and Travis Patton (1990). Theory, Evidence, And Intuition. American Sociological Review 55: 300-304.

Markovsky, Barry, David Willer, Brent Simpson and Michael Lovardia (1997). Power In Exchange Networks. American Sociological Review 62: 833-837.

Mare, Robert (1991). Five Decades Of Educational Assortative Mating. American Sociological Review 56: 15-32.

McAdam, Doug and Ronnelle Paulsen (1993). Specifying The Relationship Between Social Ties And Activism. American Journal of Sociology 99: 640-667.

Merton, Robert (1995). The Thomas Theorem And The Matthew Effect. Social Forces 74: 379-422.

Michener, Andrew, Eugene Cohen, and Aage Sorensen (1977). Social Exchange. Predicting Transactional Outcomes In Five-Event, Four-Person Systems. American Sociological Review 42: 522-535.

Molm, Linda (1989). Punishment Power: A Balancing Process In Power-Dependence Relations. American Journal of Sociology 94: 1392-1418.

______ (1990). Structure, Action, And Outcomes: The Dynamics Of Power In Social Exchange. American Sociological Review 55: 427-447.

______ (1991). Affect And Social Exchange: Satisfaction In Power-Dependence relations. American Sociological

Review 56: 475-493.

______ (1997). Risk And Power Use: Constraints On The Use Of Coercion In Exchange. American Sociological Review 62: 113-133.

Molm, Linda and Gretchen Peterson (1999). Power In Negotiated And Reciprocal Exchange. American Sociological Review 64: 876-891.

Molm, Linda, Theron Quist and Philip Wiseley (1994). Imbalanced Structures, Unfair Strategies: Power And Justice In Social Exchange. American Sociological Review 59: 98-121.

Molm, Linda, Gretchen Peterson and Nobuyuki Takahashi (2003). In The Eye Of The Beholder: Procedural Justice In Social Exchange. American Sociological Review 68: 128-152.

Oegema, Dirk and Bert Klandermans (1994). Why Social Movement Sympathizers Don’t Participate: Erosion And Nonconversion Of Support. American Journal of Sociology 49: 703-722.

Olsen, Marvin (1972). Social Participation And Voting Turnout: A Multivariate Analysis. American Sociological Review 37: 317-333.

Opp, Karl-Dieter (1988). Grievances and Participation in Social Movements. American Sociological Review 53: 853-864.

______ (1989). The Rationality Of Political Protest. Boulder: Westview Press.

Pappalardo, Adriano (1991). The Rational Paradigm In Political Science: Persistent Anomalies And The Role Of Sociology. Sociological Theory 9: 228-231.

Perrone, Luca (1984). Positional Power, Strikes, And Wages. American Sociological Review 49: 412-426.

Pescosolido, Bernice (1992). Beyond Rational Choice: The Social Dynamics Of How People Seek Help. American Journal of Sociology 97: 1096-1138.

Podolny, Joel (1993). A Status-Based Model Of Market Competition. American Journal of Sociology 98: 829-872.

Raub, Werner and Jeroen Weesie (1990). Reputation And Efficiency In Social Interactions: An Example Of Network Effects. American Journal of Sociology 96: 626-654.

Sakamato, Arthur and Meichu Chen (1991). Inequality And Attainment In A Dual Labor Market. American Sociological Review 56: 295-308.

Schneider, Friedrich (1994). Public Choice--Economic Theory Of Politics. Pp. 177-192 in Essays on Economic Psychology. Hermann Brandstatter and Werner Guth (Eds.). Berlin: Springer-Verlag.

Schram, Arthur and Frans van Winden (1994). Why People Vote: The Role Of Inter-And Intragroup Interaction In The Turnout Decision. Pp. 213-250 in Essays on Economic Psychology. Hermann Brandstatter and Werner Guth (Eds.). Berlin: Springer-Verlag.

Simon, Herbert (1976). Administrative Behavior. New York: Free Press.

Smelser, Neil (1997). Problematics Of Sociology. Berkeley: University of California Press.

Smith, Michael (1990). What Is New In New Structuralist Analyses Of Earnings. American Sociological Review 55: 827-841.

Snow, David, Burke Rochford, Steven Worden and Robert Benford (1986). Frame Alignment Process, Micromobilization And Movement Participation. American Sociological Review 51: 464-481.

Snyder, David (1975). Institutional Setting And Industrial Conflict: Comparative Analyses of France, Italy and the US. American Sociological Review 40: 259-278.

Steelman, Lall and Brian Powell (1991). Sponsoring The Next Generation: Parental Willingness To Pay For Higher Education. American Journal of Sociology 96: 1505-1529.

Stinchcombe, Arthur (1990). Comment. Rationality and Society 2; 214-223.

Stolte, John, Gary Fine, and Karen Cook. (2001). Sociological Miniaturism: Seeing the Big Through the Small in Social Psychology. Annual Review of Sociology 27: 387-413.

Swedberg, Richard (1998). Max Weber and the Idea of Economic Sociology. Princeton: Princeton University Press.

Thaler, Richard (1994). Quasi-Rational Economics. New York: Russell Sage Foundation.

Thibaut, John and Harold Kelley (1959). The Social Psychology Of Groups. New York: Willey.

Tiryakian, Edward (1995). Collective Effervescence, Social Change And Charisma; Durkheim, Weber and 1989. International Sociology 10: 269-279.

Turner, Jonathan (1987). Toward A Sociological Theory Of Motivation. American Sociological Review 52: 15-27.

Uehara, Edwine (1990). Dual Exchange Theory, Social Networks, And Informal Social Support. American Journal of Sociology 96: 521-557.

Wallace, Michael, Larry Griffin and Beth Rubin (1989). The Positional Power Of American Labor, 1963-1977. American Sociological Review 54: 197-214.

Willer, David, Barry Markovsky and Thomas Patton (1989). Power structures: Derivations And Applications Of Elementary Theory. Pp. 313-351 in Sociological Theories In Progress. Berger, Joseph, Morris Zelditch and Bo Anderson (Eds.). Newbury Park: Sage.

Willer, David (1992). The Principle Of Rational Choice And The Problem Of A Satisfactory Theory. Pp. 49-77 in Rational Choice Theory. In Coleman James and Thomas Fararo (Eds.). Newbury Park: SAGE Publications.

Yamagishi, Toshio, Mary Gilmore, and Karen Cook (1988). Network Connections And The Distribution Of Power In Exchange Networks. American Journal of Sociology 93: 833-851.

Yamaguchi, Kazuo (1996). Power In Networks Of Substitutable/Complementary Exchange Relations; A Rational Choice Model And An Analysis Of Power Centralization. American Sociological Review 6: 308-332.

______ (1997). The Logic Of The New Theory And Misrepresentations Of The Logic. American Sociological Review 62: 838-841.

Zelizer, Viviana (1989). The Social Meaning Of Money: Special Monies. American Journal of Sociology 95: 342-377.


1. Please send correspondence to Milan Zafirovski, Department of Sociology, University of North Texas, Denton, TX 76203; E-mail

2. This may be a case of self-defeating internal contradictions in rational choice models of social exchange. For example, critics (Markovsky et al., 1997: 833) find such contradictions in the rational choice treatment of power in exchange networks (Yamaguchi, 1996; Yamaguchi et al., 1988).

3. The assumption of zero--and a fortiori non-negative--marginal utilities or valuations for all actors neglects the possibility that what is one individual’s happiness or cure may be another’s misfortune or poison.

4. Coleman just reformulate Pareto’s notion of economic equilibrium as the result of the opposition between wants (demand) and scarcity (supply), i.e., tastes and obstacles (for their attainment).

5. One may wonder how plausible is this assertion in regard to those US plutocrats seeking power in the presidency and other political offices. Do they really seek political power or public service and, for that matter, social status as just a means to profit maximization or rent seeking, as public choice theorists and economists contend--or also intrinsically, i.e. as Weber says, for “its own sake”? Theory and evidence from social psychology about the prominence of intrinsic motivation as distinguished from extrinsic incentives--viz., that people do not do things just for, or are happy (Lane, 2000) because of, money but also out of altruism, civic duty, etc.--in social behavior, suggest rather this second possibility.

6. Burke (1997: 149) also objects to the procedure of predicting power (Willer, Markovsky, and Patton, 1989) by the graph-theoretic power index (GPI), i.e., the number of points gained and allocated in exchange transactions, that the distribution of points earned perpetuates economics’ myth that individuals desire only to accumulate wealth.

7. Homans’ argument seems inconsistent with the premise of the social psychology of groups (Thibaut and Kelley, 1959), including the social psychology of organizations.

8. Emerson’s early version of the behaviorist model of social exchange operates with the concepts of operant psychology. Specifically, his exchange theory is founded on operant psychology and at its core are “operant, discriminative stimulus, and reinforcing stimulus” (Emerson, 1969: 379, 395).

9. Markovsky et al. (1984) use the framework of sociological social psychology to analyze “status interventions” or “social comparison functions.” However, social psychologists report that, alongside their positive effects, social comparison processes can also exert detrimental effects on well-being or happiness.

10. This multiple equation symbolizes such a multivariate model of social exchange: y = α + β1x + β2x2 + β3x3 + β4x4 + ε, where x1 stands for the class of economic variables, such as money, wealth, or profit, the impact of which on social exchange expresses the rational choice or private (nonsocial) utility hypothesis. X2 represents for social-psychological variables, such as interpersonal interactions and ties, in social exchange reflecting the embeddedness or social utility (Friedland and Nadler, 1999) hypothesis. X3 means cultural variables in exchange, such as norms, values and representations, as assumed by the normative-institutional hypothesis of social exchange. Finally, X4 signifies political variables, such as power, domination or authority, within a social dominance orientation (or Weberian) hypothesis of exchange. As before, y is social exchange, and ε a residual term here referring to other, non-social variables.) The model has this form in matrix terms: y = βxX + βzZ + ε , where y is a vector of modes of exchange, X is a matrix of economic variables and Z a matrix of non-economic variables in exchange, βx and βz are vectors of regression coefficients indicating the effects of X and Z, respectively, on y, and ε is a vector of residual or error terms as defined above.

11. Hence, the rational choice model of social exchange is easily condensed in this bivariate linear form: y = α + βx1 + ε, where y is social exchange as a dependent variable, and x1 utility, profit or any other economic explanatory variable, while ε is residual or error term pertaining to other, non-economic variables, α is the regression intercept, and β is the regression coefficient showing the influence of x on y. Or in a matrix form y = βX, where y is a vector of modes of exchange, β a vector of regression coefficients indicating the effects of X on y, and X is a matrix of economic explanatory variables.

12. The following bivariate equation would represent such behavioral models of exchange: y = α + βx2 + ε, where x2 represents reinforcement stimuli and similar behavioral variables, and e error term referring to other, non-behavioral explanatory variables. In the way of digression, what Weber would call spiritualist or culturalist models of social exchange are bivariate as well, insofar as they, too, posit only one class of independent variables, e.g., symbolic or cultural ones. In this case, these models are represented analogously by a bivariate equation: y = α + βx3 + ε, where x3 denotes cultural explanatory variables, and e other, non-cultural variables.

13. Baron and Hannan (1994: 1124) describe as puzzling efforts by rational choice sociologists, including exchange theorists, to expand the types of capital, stating that they are “baffled that sociologists have begun referring to virtually every social feature as a form of capital.”

14. Alexander (1998:15) observes that contemporary exchange theory “is the only microfoundation that has participated in some of the synthesizing effects [in moderns sociology]. It has done so by moving toward a macro level of theorizing and [..] sought to remain a one-sided theory and not to participate in the kind of ‘outreach’ that so characterizes the dominant general theories of our day.” (Here, reference is made to rational choice versions of exchange theory. ) Overall, he (Alexander, 1998:15) suggests that no contemporary effort exists to “create a general social theory that has a distinctly micro-orientation”, thus apparently dismissing the claims of generality made by exchange or rational choice theory.

15. Expected, anticipated or planned reactions can greatly affect present attitudes and behaviors not only in collective action, but also in social relationships, including exchange. In particular, this applies to the impact of anticipated, predicted or post-behavioral affective reactions in this regard. For example, in the context of the theory of planned behavior social psychologists have investigated the influence of anticipated affects on behavioral choice, showing that such anticipations “predicted behavioral intentions independent from general attitudes (evaluations) toward the behavior.”

16. In light of this economic reduction of emotions to (as a neoclassical economists, Robertson, puts it) “utility and all that” some contemporary exchange theories propose constructing an “affect theory” of social exchange (e.g. Lawler, 2001; also Molm, 1991).