George C. Homan's theory on social exchange is critically examined and found to have serious shortcomings with regard to its deductive and inductive aspects. An expecially prominent shortcoming concerns the tautological character of his concept of reward," which makes his theory deductively unclear and empirically untestable. Homan's critique against functionalism is also applicable to his own theory. His system exhibits a number of similarities with classical hedonism and is in large measure subject to the same criticisms that have been aimed at hedonistic principles. (Author/DB)