Social exchange theory is a social psychological and sociological perspective that explains social change and stability as a process of negotiated exchanges between parties. Social exchange theory posits that all human relationships are formed by the use of a subjective cost-benefit analysis and the comparison of alternatives. The theory has roots in economics, psychology and sociology.

Social exchange theory features many of the main assumptions found in rational choice theory and structuralism.

Costs are the elements of relational life that have negative value to a person, such as the effort put into a relationship and the negatives of a partner. (Costs can be time, money, effort etc.)

Rewards are the elements of a relationship that have positive value. (Rewards can be sense of acceptance, support, and companionship etc.)

The Social Exchange perspective argues that people calculate the overall worth of a particular relationship by subtracting its costs from the rewards it provides.

Worth = Rewards – Costs

Peter Michael Blau (February 7, 1918 – March 12, 2002) was an American sociologist and theorist. Born in Vienna, Austria, he immigrated to the United States in 1939. He received his PhD at Columbia University in 1952, and was an instructor at Wayne State University in Detroit, Michigan from 1949–1951, before moving on to teach at the University of Chicago from 1953 to 1970. In 1970 he returned to Columbia University, where he continued to teach until 1988. From 1988 to 2000 he taught as an emeritus professor at University of North Carolina, Chapel Hill in the same department as his wife, Judith Blau. His sociological specialty was in organizational and social structures, in particular bureaucracy. He produced theories with many applications within social phenomena, including upward mobility, occupational opportunity, heterogeneity, and how population structures can influence human behavior. He also was the first to map out the wide variety of social forces, dubbed “Blau Space” by Miller McPherson. Blau-space is still used as a guide by sociologists and has been expanded to include areas of sociology Blau himself never specifically covered. In 1974 Blau served as president of the American Sociological Association.