Social Engineering is equivalent to what the Civilization games refer to as form of government. However, Alpha Centauri's system is the most flexible of any Civ game (until Civilization IV): you can not only choose the form of government, but fine-tune its economy, values, and how it embraces advanced technology.
In Civ games, it is usually the rule that you must switch out of your starting form of government as soon as you can get any other form. This is not always true in this game. It is surely important to adjust your Social Engineering choices, but the time must be ripe. Would you want to switch to a Police State if you're already inefficient? No! You should only use Police State if your empire is reasonably efficient and will remain so.
Your Social Engineering choices affect the AI factions' attitudes toward you. Each faction has a "preferred" choice and an "aversion" choice. For example, Morgan will begin to like you if your economy is a Free Market (his preferred choice), and will hate you for running Planned (his aversion). Likewise, Deirdre will hate you for running Free Market, and love you if you're Green. Factions will dislike you slightly if you use any other choice in the category of their preferred choice. To use the previous examples, Morgan will be wary of you if you are using Green economics, and Deirdre if you are running Planned. Listed under each socio/economic model are the factions whose attitudes are affected if you are using that model.
A faction may not select its aversion as a current engineering choice, regardless of whether it is AI-controlled or human-controlled.
No advantages or disadvantages. While it is balanced, it lacks focus. Yang will want to switch to Police State as soon as possible because it will grant him great advantages with the only penalty being the upheaval cost, due to his immunity to inefficiency.
+2 Support, +2 Police, -2 Efficiency (except Yang)
This is Yang's best option because he incurs no penalty from it, and he starts with the option to boot.
Police State is a useful military choice early game for factions that can't support more than 2 units. The added Police stat also helps keep newly-conquered bases from rioting, allowing you to continue to reinforce from the front lines with better effectiveness.
Seemingly a less preferable choice later game, it reveals its merits on higher levels when you need everything to cope with the chronic rioting of your bases. The police rating will allow you to hold off on building Hologram Theatres, a very expensive drone control option that can severely drag down a starting economy with maintenance. Balancing Police State with Green to cope with inefficency slows down your vertical growth. Without balancing this technology with Green, the negative efficiency may be severe enough to completely wreck the economy of even a mid-sized empire.
+2 Efficiency, +2 Growth, -2 Support
Not a good idea for militaristic players early on, but great for pacifists. The extra efficiency will strengthen the economy, while the growth will help the faction expand, both horizontally and vertically. Watch out when sprawling those bases, though - you lose the 10 free minerals for new bases under a Democracy.
One popular strategy is to have a Democracy and a Planned economy together for +4 growth. Any base that has a Children's Crèche will have +6 Growth, causing it to grow every turn as long as there are sufficient nutrients (similar to the Cloning Vats).
Later on in the game, the support penalty becomes much less severe due to Clean Reactors.
+2 Probe, +1 Morale, -2 Research
When a faction switches to Fundamentalist, they mean business! This choice was designed for one thing: kicking butt. Your research will be crippled, so forget about it unless you can balance it (with Knowledge or your faction's traits), or you wish to start the war to end all wars.
If playing as Miriam and using a Fundamentalist government, your research will be so badly crippled, it's not even worth putting energy towards it. Consider setting your social engineering to 50% Econ, 50% Psych to make all your bases enter into golden ages and pop boom. To keep from falling behind, simply use your probe teams to steal any technology your opponents have that you don't, and use your superior bases and troops to obtain a conquest victory.
No advantages or disadvantages. While it is balanced, it lacks focus. Yang will want to switch to Planned as soon as possible because it will grant him advantages with the only penalty being the upheaval cost, due to his immunity to inefficiency.
+2 Economy, -3 Planet, -5 Police
This is only good for one thing: bringing in lots of money (especially as Morgan with numerous treaties). Forget about balancing out the -5 Police; reversing or minimizing the -3 Planet is doable. The penalty isn't too bad if you know what you're doing. It is if you don't. An additional benefit is increased research due to higher gross energy.
The drone problem can be reduced (or even eliminated) by switching Psych to 10% or 20% in social engineering. Military deployment is out of the question with this economy due to pacifism, but due to your large bank balance, you can instead conduct warfare using probe teams to subvert enemy units and bases.
Advanced players may want to switch to Free Market as early as possible by researching Industrial Economics at the first opportunity. The base tile of each base is free from early game restrictions, and not much energy is being produced elsewhere because the focus is on creating Colony Pods, therefore the energy output of each base can often be doubled, or nearly so.
The Spartans are uniquely capable of lowering the drone penalty for free market before the advent of Thought Control. This is done by use of Police State/Ascetic Virtues. This yields a -1 police rating, allowing one police unit but no nerve stapling.
+2 Growth, +1 Industry, -2 Efficiency (except Yang)
Again, Yang will usually want this because he suffers no disadvantages. Otherwise, the efficiency hit can be crippling. The combination of Police State with Planned is signing your faction's death certificate — unless you're Yang, in which case it's your most optimal combination! Otherwise, it is often good for a Democratic faction (in order to give a further boost to Growth), especially because the efficiency of Democratic will balance perfectly against the inefficiency of Planned and with Children's Crèches your bases will enter pop boom. Useful in early game because you need to expand and build infastructure.
+2 Efficiency, +2 Planet, -2 Growth
Best if you wish to fight with Mind Worms — both in the sense of fighting against them and fighting using them. Initially, the +2 Efficiency seems to not be worth the -2 Growth, but the Growth penalty is easily negated by building a Children's Crèche, which gives the base in which it's built +2 Growth. Also, keep in mind that once you have many many bases, +2 efficiency will benefit your economy as much as FM's +2 economy without all the drawbacks.
Combined with Democracy, your faction may have +4 efficiency. With a paradigm economy, your faction can shift its social engineering to full economy or full research without suffering penalties, which allows great flexibility.
No advantages or disadvantages. All other Values will hurt you militarily in some way or other, but Power will more than counterbalance that. The others will not; therefore, choosing a Value can be the most determining factor in whether or not you will play a military-focused middlegame.
+2 Support, +2 Morale, -2 Industry
Another choice that warmongers will want, although the -2 Industry can also hurt their cause. There is no reason to choose Power unless you wish to use your military might extensively. The Cloning Vats removes the penalty to Industry, making this choice much more ideal.
The Spartans can use Power along with secret projects to make all their units elite. Elite units have a +50% modifier in combat, and have an additional movement point, giving a massive advantage in mobility (your infantry will move as fast as rovers, and your rovers will be able to move as fast as hover tanks).
+2 Research, +1 Efficiency, -2 Probe
This choice is good for boosting your Research through the roof. While The Hunter-Seeker Algorithm does not improve your Probe teams, it does make you immune to being Probed, so the defensive half of the penalty is removed.
Without the Hunter-Seeker Algorithm, it is a good idea to put defensive probe teams on your border bases, so you are not as easily robbed of your research.
+1 Economy, +1 Industry, -2 Morale
As the name implies, this is for the money-grubber. Especially useful for Morgan, as he can run Wealth instead of Free Market and get the much-desired +1 energy per square.
Alternately, Morgan can use both Free Market and Wealth for a +4 Economy rating. This yields +1 energy per square, +2 energy per base square and +2 on the commerce multiplier. The arrangement is powerful for transcend/economic victory strategies. It impairs conquest and defense by keeping the police penalty of Free Market and adding a morale penalty to Morgan's already harsh support value. This means the smaller forces he does possess will be weakened, especially against a mass attrition attack.
An advanced tip is to focus this strategy when on an archipelago map and less so on continental ones. On an island map, Morgan can use his superior energy reserves and industry to rush very expensive naval units that the more warlike factions cannot build in numbers. Thus he can repel landings and build in peace. On a continental map, a Wealth/Free Market Morgan is free game for swarms of dirt cheap landunits that will mill down his smaller concentrations of weakened units.
This is the Spartans' aversion.
No advantages or disadvantages. As with Values, all other options will hurt you militarily, but Thought Control will counterbalance it by far if you have enough positive modifiers to Support elsewhere. Future Society is geared towards helping you bring the game toward the end, and selecting one will likely be the final Social Engineering choice you make.
+2 Efficiency, +2 Planet, +2 Research, -3 Police
A good all-round choice. By the end game, you should have enough specialists, base facilities and secret projects to make drone riots a thing of the past. The Efficiency will greatly help large empires (the bonus continues to stack even after +4 efficiency); the Planet modifier will help keep your futuristic empire from being destroyed by rampaging swarms of mind worms and the Research will help you bring the game to a close with Ascent to Transcendence.
This is the preferred choice of the Cybernetic Consciousness (who else?). Additionally, the Consciousness is immune to the Police penalty, as is any faction that has built The Network Backbone.
+2 Economy, +2 Growth, +2 Industry, -2 Morale
A massive boost to infrastructure for the endgame.
Combined with Democracy and Planned, all of your bases will enter pop boom, even without a Children's Crèche, allowing any newly-created bases (usually naval bases at this point in time) to quickly catch up with the others if you have a decent amount of satellites.
The Economy bonus, combined with other economy bonuses, makes it possible to reach +2 energy per square.
+2 Morale, +2 Probe, +2 Police, -3 Support
An all-military option, despite the -3 Support. The Cloning Vats removes the -3 Support penalty. Even without the Cloning Vats, by this point in the game, Clean Reactors can help to compensate for the support malus.