Social exchange theory is based on the idea that in relationships, people try to minimize costs and maximize rewards to ensure equity. Initiated by George Casper Homans in 1900s, this theory gained popularity amongst other theorists. Economics play a major part in our lives, and this theory shows that all are relationships are also based on it. It suggests that individuals pursue relationships when they have to put in less input to receive more output but if it the other way round, they will abandon the relationship. According to this theory, the social structure is a result of the conscious math that we do which is:
Outcome= Rewards-Costs. The cost here not only signifies the economic factors but also any other intangible factors like time and effort. The rewards also signify the both the tangible and intangible factors. Positive relationships are ones where benefits outweigh costs, while negative are the ones where its vice-versa. A common example of application of this theory would be a classroom set-up. A class has more than 30 students but a particular student on an average has only one best friend. How do we select that ‘one’ friend out of 30? Here is when social exchange theory comes into play and we weigh our options and choose the one with most benefits. Maybe that one friend gives us more affection or time or support than others. For this friendship to last, equity is very important. Both friends must equally respect, care and support each other.
To calculate the rewards of a relationship, social exchange theory gives us two standards of comparison. The first one being the comparison level or CL. This is a subjective standard because it depends on the individual’s past, expectations and general knowledge. Individuals compare the costs and benefits of a present or future relationship to their past and decide if their expectations are being fulfilled. It is subjective in the sense that different people have not only different past experiences but also different levels of expectations. Second standard is the CL Alt or Comparison level of alternatives. This is relative and measures stability instead of satisfaction. Following the classroom example, a particular student in a class of 30 pupils has 29 options to make friends from. Even when he makes friends with one of those 29 pupils, he consciously compares his friend to the alternatives that he has. Hence this is a measure of how good or bad a relation is in comparison to other similar possible relations. It is notable that CL is an internal factor consisting of our expectation from a relation and so is particularly stable, whereas CL Alt is an external factor and can change with every new person we meet.
The comparison levels strive to achieve equity which means a balance in a relationship where rewards and costs of a relation balance each other. An unequal relationship which has a lopsided balance of these two factors is likely to break off.