Economic exchange theory

October 19, 2017
Contemporary International

Exchange theory Exchange theories view social order as the unplanned outcome of acts of exchange between members of society. There are two major variants. Rational-choice (or, as it is sometimes known, rational-action) theory locates the source of order in the personal advantage individuals gain through co-operative exchange. Anthropological-exchange theory claims that both order and the pursuit of individual advantage are effects of the underlying ritual and symbolic nature of the thing exchanged. In both versions social conflict (or disorder) is simply the consequence of the breakdown of the exchange process.

Rational-choice theory can be traced as far back as classical political economy of the eighteenth century, the most familiar example being Adam Smith's theory of the division of labour, expounded at the start of The Wealth of Nations (1776). According to Smith, the hidden hand of the free market leads prudent self-interested individuals to promote the public welfare, even though that was never their intention. The modern discipline of economics, which grew out of political economy, has developed a highly abstract and increasingly mathematically formulated version of rational-exchange theory, according to which prices and the allocation of scarce resources can be explained by rational maximization of utility by economic actors in relation to money outlay. The apparent success of this sophisticated and relatively unified body of theory inevitably led to the suggestion that the same method might be applied to the wider subject-matter of sociology. In the United States especially the term ‘exchange theory’ almost exclusively denotes these attempts to explain social life by rational-choice methods. Examples include the controversial writings of George Homans and Peter Blau, and those of the economist Gary Becker, all of whom in various ways have tried to apply the idea of calculative individual action to those very theatres of social life where, on first sight, it would seem most inappropriate. These include the family, loving relationships, and sentiments of collective altruism and obligation.

One of the most sophisticated treatments is that by Peter Blau (see especially Exchange and Power in Social Life, 1964
). Blau offers a ‘structural’ version of exchange theory, which goes beyond the psychological reductionism of writers such as George Homans by arguing that ‘reciprocal exchange of extrinsic benefits’ between actors may be absent or incomplete—as, for example, where power relations are wielded. This renders exchange theory—at least for those who accept that much of social behaviour is guided by exchange—sociologically more plausible (see P. P. Ekeh, Social Exchange Theory—The Two Traditions, 1974

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