Ricardo, Engels and Marx in 1844

TAKAHISA OISHI
Professor of Economics
Takushoku University
Tokyo, Japan

INTRODUCTION

Friedrich Engels, with whom, since the appearance of his brilliant sketch on the criticism of the economic categories (in the Deutsch-Französische Jahrbücher), I maintained a constant exchange of ideas by correspondence, had by another road (compare his The Condition of the Working Class in England in 1844) arrived at the same result as I . . . .[1]

The Preface to A Critique of Political Economy (1859) quoted above indicates:
(1) that in 1844 Marx appreciated Engels' Outline of a Critique of Political Economy (1844) -- hereafter OCPE -- as 'a brilliant sketch',
(2) that Marx had maintained this appreciation in 1859; and
(3) that Marx appreciated OCPE only as a brilliant 'sketch' on 'the criticism of the economic categories'.
This Preface of 1859 shows how highly Marx thought of OCPE and is very instructive for rethinking how Marx formed 'the decisive points of our [Marx's] view'[2] from their formation process -- movement. However, large numbers of studies, which have been made over the last few decades, have completely failed to explain the meaning of OCPE in Marx's formation process. This is due to the methodological inadequacies of those studies, which is best declared in their interpretation of OCPE. Thus I am concerned here with a methodological critique of them.
Up to now, the studies on the development of Marx's thought and theories have been under the strong influence of Soviet Marxism. They interpreted all Marx's and Engels' works preceding The German Ideology (1845-1846) -- hereafter GI -- as 'self-clarified' through the formation of the so-called 'materialist interpretation of history' in GI. The only aim of their effort was to negate one concept in Marx's Economic and Philosophical Manuscripts (1844) -- hereafter EPM --, i.e., 'estranged labour,' which contains a profound criticism of Soviet society. They have tried to justify their ideology by arguing against Marx's value theory in the early 1840s. They have asserted that Marx, in the works preceding GI, 'negated' or 'rejected' the Ricardian labour theory of value, which was subsequently withdrawn by the later Marx[3]. The reasons they have given are:
(1) In 1844 Marx was under the strong influence of Engels, who overestimated 'the effect of competition' and negated the concept 'value' by criticising 'value' as an 'abstract' notion.
(2) In 1844 Marx agreed with Proudhon's value theory which negates equal exchange.
The first point to note is that both reasons originated solely in Marx's criticism of the Ricardian value theory in Notes on Ricardo (1844), which is concerned with the concept of 'abstraction'. Other works in the early 1840s do not support any of these interpretations.
The second point is that these arguments contradict each other. A close look at OCPE would reveal that Engels disagrees with the Proudhonian value theory and accepts the law of value in the classical sense, as he states.

It is, however, quite correct, and a fundamental law of private property, that price is determined by the reciprocal action of production costs and competition (KARL MARX-FREDERICK ENGELS Collected Works, Volume 3, 427. Hereafter cited as 3 MEC 427).

The third point to note is the methodological inadequacy of their studies. They understand Marx's concept 'value' in Capital, Volume 1, as almost the same as Ricardo's. They evaluate the works preceding Capital by this Ricardian standard. This is the explanation why they formulate the development of Marx's value theory; from the negation (or rejection) to the affirmation (or acceptance) of the Ricardian value theory. In short, they assert that in 1844 Marx was not a Ricardian but later became a Ricardian. That which is to be clarified is how Marx became Marx, i.e., the formation of the differentia specifica of Marx's value theory. However, even if their assertion was correct, the process they have clarified would have been the prehistory of Marx's formation, because they assert that Marx became a Ricardian, i.e., Marx was not 'Marx' yet. This results from their methodological inadequacies:
(1) In Marx's 'genetic presentation' of economic categories, the order of inquiry and that of presentation are opposite[4]. Thus the definition of value as the Anfang is formed later than that of surplus-value. The chapter on 'The Commodities' is first formed only after Grundrisse: the manuscripts of 1857-58. This, however, does not mean that Marx accepted the classical value theory in 1858, but that Marx completed his criticism of the classical value theory, which is retroactive to 1844. Consequently, the concept 'value' in the chapter "The Commodities" cannot become the criterion for Marx's formation of value theory.
(2) The definition of 'value' in chapter 1 of Capital, Volume 1, is the Anfang of Marx's 'genetic presentation' of economic categories and is merely the first and an abstract definition of 'value'. As Marx writes in his letter to Kugelmann[5], value is the capitalist form of 'social labour' or of 'the social character of labour'. This means that 'value' is defined further in the following chapters until the end of Capital, Volume 3. On the other hand, Ricardo's 'value' is a species of 'price', i.e., the 'natural price' which consists of the average wage and average profit. Thus, Marx's value is far from Ricardo's, and it is this differentia specifica which is to be clarified.
(3) Although in Capital Marx stresses that his value theory is in the Ricardian line, this does not mean at all that his value theory is the same as the Ricardian. In the Ricardian value theory, 'value' is the equivalent expression of 'exchangeable value' and is defined as 'cost, including profit'. His concept 'labour bestowed in production' is one of the two sources of 'exchangeable value'. He does not say that 'value' (in Marx's sense) is determined by 'the amount of labour bestowed in production' but that commodities are exchanged 'almost in proportion to' the amount of labour expended in production, meaning the sum total of wages by 'the amount of labour'[6].
(4) Ricardo, like Smith, confused 'value' with 'price'. This means that their definition of value as 'natural price' is nothing but a tautology, because it consists of that which has yet to be explained, i.e., average profit and average rent. The classical value theory is to be criticised as a 'value' determination. This does not mean that the concept is useless as the definition of 'price'. In short, they have not grasped the distinction between 'value' and 'price' well enough, which is criticised by Marx as the 'confusion of value with price'. Soviet Marxists fail to understand the problem of 'natural price' as the definition of 'value'. They have overlooked the reason why the criticism by Marx and Engels is focused on chapter 1 $ 4, chapter 2 and chapter 4 of Ricardo's The Principles of Political Economy and Taxation (1815) but not on the first three sections of chapter 1.

MARX AND ENGELS ON 'A CRITIQUE
OF POLITICAL ECONOMY'

ENGELS' CRITIQUE OF POLITICAL ECONOMY

ENGELS' TASK

According to Engels, both the mercantile system and modern liberal economics are 'political economy', i.e., 'an entire science of enrichment' (3 MEC 418) which came into being as 'a natural result of the expansion of trade' (ebd.); 'born of the merchant's mutual envy and greed, bears on its brow the mark of the most detestable selfishness' (ebd.). Naturally, Engels recognises an advance in the development of political economy from bullionism via the mercantile system to the classical economy. If the principle of bullionism, which everywhere prohibited the export of 'precious' metals, 'had been rigourously carried through trade would have been killed'. Thus people began to go beyond this first stage. They came to appreciate a more sociable system, i.e., the mercantile system. The eighteenth century, the century of revolution, also revolutionised economics and produced Smith's liberal system. 'But just as all the revolutions of this century were one-sided and bogged down in antitheses...likewise the economic revolution did not yet go beyond antitheses' (3 MEC 419), because 'It did not occur to economics to question the validity of private property' (ebd.).
'The new economics does not disavow its own premises,
i.e., commerce, and is obliged to have recourse to sophistry and hypocrisy so as to cover up the contradiction in which it became entangled' (ebd.). 'The mercantile system still had a certain artless Catholic candour and did not in the least conceal the immoral nature of trade' (3 MEC 422). Nevertheless 'Protestant hypocrisy took the place of Catholic candour. Smith proved that humanity, too, was rooted in the nature of commerce; that commerce must become "among nations, as among individuals, a bond of union and friendship" instead of being "the most fertile source of discord and animosity"' (3 MEC 422-423).
It is in this sense that Engels names Smith 'the economic Luther' (3 MEC 422). The nearer the economists come to the present time, sophistry necessarily increases. This is why Ricardo is more guilty than Smith, and McCulloch and Mill are more guilty than Ricardo. The most guilty, according to Engels, is Malthus[7]. Hence, Engels' task in OCPE becomes to disclose the hypocrisy of economists, i.e., the invalidity of private property and the immorality of commerce which drove them to hypocrisy and sophistry.

ENGELS' METHOD

It follows from his task that the method of his critique of political economy is taking up the economic categories one by one and disclosing the sophistry of the economists in their definitions.

In the critique of political economy, therefore, we shall examine the basic categories, uncover the contradiction introduced by the free-trade system, and bring out the consequences of both sides of the contradiction (3 MEC 421).

Engels writes that he proceeds from a 'purely human, universal basis', meaning that only this viewpoint can criticise 'the premises common to both [contradicting economists] and can assign to both their proper position' (3 MEC 420-421).

ENGELS' VIEW OF THE ECONOMIC CATEGORY

The first point to note is that he looks as if Engels does not understand economic categories as theoretical expressions of capitalist relations of production and commerce. His 'value' is a good example.

...and once this [private property] is superseded, there can no longer be any question of exchange as it exists at present. The practical application of the concept of value will then be increasingly confined to the decision about production, and that is its proper sphere (3 MEC 426).

However, to be fair, the second point to note is that he writes in a preceding part that trade is the 'immediate consequence of private property' (3 MEC 422) and 'value' is the 'next category established by trade' (3 MEC 424). Thus it would be more than just an empty compliment and not his misunderstanding that leads Marx to write in The Holy Family (1844) as follows:

Proudhon does not consider the further creations of private property, e.g. wage, trade, value, price, money, etc., as forms of private property in themselves, as they are considered, for example, in the Deutsch-Französische Jahrbücher (see Outlines of a Critique of Political Economy by F.Engels) . . . (4 MEC 32).

The third point to note relates to his 'critique' of political economy. Understanding the economic categories as the theoretical expressions of capitalist relations of production and commerce, naturally does not mean accepting the definitions of the categories made by political economists. Actually, it means redefining economic categories after examining how far they successfully express capitalist relations. From this point of view, classical economic categories are not scientific enough, e.g. 'value' is confused with 'price'. Now let us return to the subject.
As we have already seen, Engels, on the one hand, understands economic categories as the theoretical expressions of capitalist relations, but, on the other, he writes as if the proper sphere of economic categories were in future society. The problem is how we should understand the statements. In my opinion, Engels make a distinction between an historical form and an unhistorical essence, and plans a new and more rational form of the essence in future society. It seems to me to be the best interpretation of his viewpoint 'which . . . proceeds from a purely human, universal basis'.
Therefore, his value theory can be understood as follows:
the value of commodities consists of two factors: 'the real inherent utility' (3 MEC 426) and 'production costs'. The first 'application of value is the decision as to...whether utility counterbalances production costs' (3 MEC 426), but 'under the dominion of private property, by competition', 'utility of an object' is hard to determine. Thus the two factors of value are separated and opposed by political economists: 'cost of production' by Ricardo and 'utilities' by J.B.Say. In the following part, let us examine Engels' critique of economic categories.
First, Engels criticises the determination of 'real value' of political economists. To begin with, Engels clearly admits that 'price is determined by the reciprocal action of production costs and competition' (3 MEC 427) and that 'real value' of political economists is 'the price at the time when competition is in a state of equilibrium' (ebd.). The point Engels makes here is that the price is not value but 'is merely a definite aspect of price' (ebd.). He is recasting 'value': from the quotient of 'price' into its source. This is the core of his criticism, but has been misunderstood as the 'negation' of labour theory of value.

Thus everything in economics stands on its head. Value, the primary factor, the source of price, is made dependent on price, its own product (ebd.).

Engels then goes on to criticise the determination of 'real value', distinguished from 'central price', by both Ricardo and Say as being one-sided. Note that he does not agree with either of them. This needs only one example:

Let us try to introduce clarity into this confusion. The value of an object includes both factors, which the contending parties arbitrarily separate--and, as we have seen, unsuccessfully (3 MEC 426).

Secondly, Engels criticises the determination of 'production costs' by economists. As capital is accumulated labour, Engels reduced the three component elements of 'production costs'-- profit, rent and wage--to the two sides: the natural, objective side, land; and the human, subjective side, labour.
Engels starts by criticising economists: that they do not think about the third factor, i.e., 'the mental element of invention, of thought, alongside the physical element of sheer labour' (3 MEC 427). He then criticises economists in that they do not explain the causes of the separation of those three elements, i.e., profit, rent and wage. According to him, 'the functions of these three elements are completely different' (3 MEC 431). 'What share land, capital and labour each have in any particular product cannot be determined. The three magnitudes are incommensurable... Therefore, when it comes to dividing the proceeds among the three elements under the existing circumstances, there is no inherent standard; as it is an alien and with regard to them fortuitous standard that decides--competition, the cunning right of the stronger' (ebd.). In contrast to the political economists, Engels plans to present economic categories in the following way:

(1) We have already seen that capital and labour are initially identical; we see further from the explanations of the economist himself that, in the process of production, capital, the result of labour, is immediately transformed again into the substratum, into the material of labour; and that therefore the momentarily postulated separation of capital from labour is immediately superseded by the unity of both.
(2) Yet the economist separates capital from labour, and yet clings to the division without giving any other recognition to their unity than by this definition of capital as "stored-up labour". The split between capital and labour resulting from private property is nothing but the inner dichotomy of labour corresponding to this divided condition and arising out of it.
(3) After this separation is accomplished, capital is divided once more into the original capital and profit--the increment of capital, which it receives in the process of production;
(4) although in practice profit is immediately lumped together with capital and set into motion with it.
(5) Indeed, even profit is in its turn split into interest and profit proper (3 MEC 430. The numbers are mine).

In short, economic categories are to be presented in the order: the process of capitalist production as the unity of capital and labour; separation between wage and profit; profit and rent in the process of circulation. The feature of his presentation is clear when we compare it with Say's Treaties of Political Economy: principles of the nature of wealth and circulation (the right of private property, wealth, value, price and etc.), principles concerning production (three elements and method of production etc.) and the sources of income and distribution (cost of production, profit, wage, rent, rent for tenancy etc.)
Furthermore, Engels expounds through this presentation of categories that, on the one hand, trade crises necessarily arrive regularly as the great plagues did in the past, as long as the producers produce as 'dispersed atoms without consciousness, of [their] species' (3 MEC 434); and that, on the other, the development of private property will bring 'a total transformation of social conditions' (3 MEC 441), or 'the reconciliation of mankind with nature and with itself' (3 MEC 424). Later we shall see that in EPM Marx also shares the same plan as Engels. Engels' presentation of economic categories is the reason why Marx rated OCPE as a 'brilliant sketch on the critique of economic categories' in the Preface of 1859.

MARX'S CRITIQUE OF POLITICAL ECONOMY

MARX'S TASK

The first point to notice is the difference between "First Manuscript: Former Part" and "First Manuscript: Latter Part" (the part so-called "Estranged Labour"). In the opening paragraph of "First Manuscript: Latter Part", Marx summarised the laws of capital which he conceptualised in "First Manuscript: Former Part". In the second and third paragraphs of "First Manuscript: Latter Part", he specifies the fundamental inadequacy of political economists as follows:

Political economy proceeds from the fact of private property. It does not explain it. It grasps the material process of private property, the process through which it actually passes, in general and abstract formula which it then takes as laws. It does not comprehend these laws, i.e., it does not show how they arise from the essence (Wesen ) of private property (3 MEC 270-271, EW 322).

The second point to notice is that hereafter Marx 'rise[s] above the level of political economy' (3 MEC 241, EW 288), in a strict sense. According to Marx, the propositions of political economists serve only as his starting-point. Political economists do not comprehended the economic laws which they formulated as necessary laws of private property, because they do not show the intrinsic connection between the laws and the 'essence of private property'. Thus in the fourth paragraph, Marx sets his task in "First Manuscript: Latter Part" and thereafter to comprehend the laws, as necessary laws, of private property, i.e., to work up the conceptions into concepts:

We now have to grasp the essential connection between private property, greed, the separation of labour, capital and landed property, exchange and competition, value and the devaluation of man[8], monopoly and competition, etc.--the connection between this entire system of estrangement and the money system (3 MEC 271, EW 323).

The importance of this difference in authorial purpose between "Former Part" and "Latter Part" of "First Manuscript" arises, because it has been ignored by Soviet Marxists and their Western followers.

MARX'S METHOD

The first point to notice is the relationship between 'private property' and 'capital'. Private property begins with landed property and reaches its peak with capital. As Marx aims to comprehend the historical development of landed property to capital as being the necessary law of private property and to abolish all sorts of private property, he starts his work by gouging out the 'essence (Wesen ) of private property in general', by analysing capital, i.e., the twofold analysis of the process of capitalist production in "First Manuscript: Latter Part" and "Second Manuscript". Through this analysis, Marx specifies 'the essence of capital', i.e., the 'essence of private property in general', as the 'estranged labour' or the labour under the command of other man[9]. There are three points to be made with regard to this 'essence of capital'.
Firstly: The essence enables Marx to comprehend economic laws as necessary laws of capital. Through the genetic presentation of economic categories, Marx shows the intrinsic connection between the 'essence' and the economic categories. Political economists understand that, on the one hand, labour is the sole source of exchange-value and the active source of use-value. On the other, the same economists conceive 'capital as the regulator of production, the source of wealth and the aim of production, whereas labour is regarded as wage-labour, whose representative and real instrument is inevitably a pauper'[10]. Marx in 1844, also in 1863, understands that 'In this contradiction, political economists merely expressed the essence of capitalist production or, if you like, of wage-labour, of labour alienated from itself, which confronted by the wealth it has created as alien wealth...'[11]. The separation between wage and profit, between profit and rent, can be comprehended as necessary laws of capital only from this essence of capital, i.e., estranged labour. The essence of capital enables Marx to comprehend the economic laws of political economists as necessary laws of capital through the presentation of economic categories, as Marx states:

Just as we have arrived at the concept of private property[12] through an analysis of the concept of estranged, alienated labour, so with the help of these two factors it is possible to evolve all economic categories, and in each of these categories . . . we shall identify only a particular and developed expression of these basic constituents (3 MEC 281, EW 333).

Secondly, the essence of capital enables Marx to comprehend the development of landed property to capital as the necessary law of private property. In this regard we should note the implication of his proposition: 'Human anatomy contains a key to the anatomy of the ape'[13]. In 'capital-labour' relation, objectively and subjectively, wealth has arrived at its peak form: in capital as well as in 'labour in general', 'all the natural and social individuality of the object [and subject are] extinguished' (3 MEC EW 336). It is only from the 'essence of capital', as the 'essence of private property in general', which enables us to understand the development of private property as a necessary law of private property. Without this essence, Marx's concept the 'civilised victory of movable capital'[14] cannot be fully understood.
Thirdly: The 'essence of capital' enables Marx to understand the necessity for the developments in economic theories from mercantilists via Quesnay to Smith. If the essence of capital is grasped as being 'labour in general', it is obvious that it contains the essence of landed property and any sort of private property.

Clearly, once the subjective essence is grasped of industry's constituting itself in opposition to landed property, i.e., as industry, this essence includes within it that opposition ....so this process is repeated in the scientific comprehension of the subjective essence of private property, of labour; labour appears at first only as lab agricultural labour, but later assumes the form of labour in general (3 MEC 293, EW 344).

With regard to this 'essence of capital', I would like to point out a difference between Marx and Engels. As we have already seen that Engels named Smith 'the economic Luther', similarly, in EPM Marx terms Smith 'the Luther of political economy'. However, we should not overlook the fact that this similarity also contains the dissimilarity between them. Marx reread and reinterpreted Engels, giving a deeper meaning. Engels called Smith 'the economic Luther' because Smith brought Protestant hypocrisy into economics. On the other hand, Marx's reason is:

Therefore the supporters of the monetary and mercantile system, who look upon private property as a purely objective being for man, appear as fetish-worshipers, as Catholics, to this enlightened political economy, which has revealed -- within the system of private property --the subjective essence of wealth. Engels was therefore right to call Adam Smith the Luther of political economy (3 MEC 290, EW342).

Smith opens his Wealth of Nations with the statement that labour is the only source of wealth. On the other hand, his propositions demonstrate that the labourer suffers most and the non-worker profits most. He does not recognise any contradiction between his principle and his propositions, because he understands the present form of labour, i.e., estranged labour, as natural, thus, as eternal. This is what Marx calls the 'cynicism' of political economy. Marx's task also includes the comprehension of this cynicism. This is very important not only because it has been overlooked by Soviet Marxists but also because it shows their methodological deficiency. Theoretically[15], all sections of EPM have strong connections with each other by this essence of private property, i.e., estranged labour. 'Estranged labour' is the core of Marx's critique of political economy[16].
There is another noteworthy point. Marx's critique of political economy is characterised by his early concern with his critique of the Hegelian philosophy of law. It is well-known that Marx explains a certain form of State from the certain form of civil society which underlies it. Marx's understanding of money and of capitalist relations of production as 'alienated' communities,[17] and his concept 'the abolition of [estranged] labour,' can be fully grasped only in this connection. In other words, his presentation of economic categories demonstrates the alienation of social labour or the social character of labour.

MARX'S VIEW OF ECONOMIC CATEGORIES

Marx in the early 1840s clearly understands economic categories as theoretical expressions of the capitalist relation of production and commerce. There is actually no evidence which disproves this. As this is very important, let us quote a couple of examples here.

The most decisive expression of the insight of the English into pauperism--and by the English we mean the English bourgeoisie and the government--is to be found in English Political Economy, i.e., the scientific reflection of the
state of the economy in England ("Critical Notes on the Article: The King of Prussia and Social Reform", appeared on the 7th of August in 1844 in the Forwärts, No. 63. See 3 MEC 193, EW 406).
Just as we have arrived at the concept of private property through an analysis of the concept of estranged, alienated labour, so with the help of these two factors it is possible to evolve all economic categories, and in each of these categories . . . we shall identify only a particular and developed expression of these basic constituents (3 MEC 281, EW 333).
Proudhon does not consider the further creations of private property, e.g. wage, trade, value, price, money, etc., as forms of private property in themselves, as they are considered, for example, in the Deutsch-Französische Jahrbücher...(4 MEC 32).

The second point concerns Marx's genetic presentation of economic categories. As we have already seen, Engels planned to present the economic categories by analysing the process of capitalist production and then the process of circulation. Marx shares similar plans: for example[18]:

The relation of private property is labour, capital and the connections between these two. The movement through which these parts [Glieder] have to pass is:
First -- Immediate or mediated unity of the two.
Capital and labour at first still united; later separated and estranged, but reciprocally developing and furthering each other as positive conditions.
Second -- Opposition of the two. They mutually exclude each other; the worker sees in the capitalist his own non-existence, and vice-versa; each attempts to wrench from the other his existence.
Third -- Opposition of each to itself. Capital = stored-up labour = labour. As such it divided into itself (capital) and its interest; this latter divides into interest and profit. Complete sacrifice of the capitalist. He sinks into the working class, just as the worker -- but only by way of exception -- becomes a capitalist. Labour as a element of capital, its costs. I.e., wages a sacrifice of capital.
Labour divides into labour itself and wages of labour. The worker himself a capital, a commodity. Hostile reciprocal opposition (3 MEC 289, EW 341).

The last point to notice is how far Marx achieved this presentation of economic categories. Despite his words 'it is possible to evolve all economic categories', Marx actually developeded only 'estranged labour', 'private property' (read:'commodities'), 'capital' ('profit' in broad sense) in EPM. However, this does not mean that his words are a mere boast, but that he has obtained the principle of his presentation of economic categories. The incompleteness of Marx's presentation is a result of lack of time but not of a methodological inadequacy. This refers to his rating highly Engels' OCPE and his contract for publication[19].

MARX AND ENGELS ON VALUE

ENGELS' CONCEPT OF 'REAL VALUE'

As we have seen, the task of OCPE is to 'examine the basic categories, to uncover the contradictions introduced by the free-trade system, and to bring out the consequences of both sides of the contradiction' (3 MEC 421). Before investigating his critique of the classical concept 'real value', as an example of it, let us confirm a couple of points.
To begin with, as I have already shown, Engels understands economic categories as theoretical expressions of capitalist relations of production and commerce.
Next, Engels distinguishes value from price. Value is recast into 'the primary factor, the source of price'. In other words, price should be evolved from value. Value is grasped as 'the relation of production costs to utility' (3 MEC 426), whereas price is determined 'by the reciprocal action of production costs and competition' (3 MEC 427). Thus Engels never negated the law of value as such and is still free from the classical confusion of value with price. In the following, let us examine his concept of 'value' by examining its two factors.
Firstly, by 'production costs' Engels means the expenditure 'which cost him [the capitalist] to produce it' (3 MEC 425) or the 'tremendous exertion' (ebd.) to produce it. There are two points to be made. One is that his 'production costs' concerns 'supply', for 'no one will sell for less than what he has himself invested in production' (3 MEC 426). The other point is that this concept differs from the Ricardian 'cost' which consists of average wage and average profit.
Secondly, by 'competition' Engels means 'utility' so long as it appears in the sphere of exchange, as he states:

The only possible way to arrive at a more or less objective, apparently general decision on the greater or lesser utility of an object is, under the dominion of private property, by competition;... (3 MEC 425-426).

With regard to this, by 'utility' Engels means the object for 'desire' which is 'something purely subjective, something which cannot be decided absolutely' (3 MEC 425). Thus, by a 'general decision on the greater or lesser utility of an object' and 'the real inherent utility of the thing', Engels means 'demand' of the whole society.
Secondly, we should note that Engels criticises both parties in the dispute over value determination, i.e., both Ricardo's and Say's determination of value is one-sided.

Let us try to introduce clarity into this confusion. The value of an object includes both factors ['production costs' of Ricardo and 'utility' of Say], which the contending parties arbitrarily separate--and as we have seen, unsuccessfully (3 MEC 426).

According to Engels, Ricardo determines value only by production costs and Say only by utility, and neither of them succeeded. In short, he determines value by both factors, namely production costs and utility. Engels clarifies this by examining the 'abstraction[s]'[20] or 'confusion[s]' of both parties.
Thirdly, we should note that 'the proper sphere' (3 MEC 426) of the concept of value is understood to be 'the decision about production' (ebd.) or 'the decision as to whether utility counterbalances production costs' (ebd.). This remark sounds as if he had failed to understand 'value' as a capitalist relation. However, it is strongly connected with his method, his views of the law of value and communism. According to Engels, under the dominion of private property, suppliers do not know the volume of demand, and 'demand and supply strive to complement each other, and therefore never do so' (3 MEC 433). 'Supply always follows close on demand without ever quite covering it' (ebd.). The law of competition, or supply and demand, is 'purely a law of nature and not of the mind' (ebd.) and 'a law which can only assert itself through periodic upheaval' (3 MEC 433-434). Thus, the concept of value cannot be practically applied under the present conditions, but in 'community' (3 MEC 435) or 'a world worthy of mankind' (ebd.)[21]. By the misleading phrase, Engels did not mean that value is not a capitalist relation. He meant that it is the capitalist form of the social distribution of labour, by 'uncover[ing] the contradiction introduced by the free-trade system' (3 MEC 421). He sees 'The truth of the relation of competition is the relation of consumption to productivity' (ebd.) in the law of value. This is the only possible consistent interpretation of 'value' in OCPE.
From all the observations above, we can conclude with fair certainty that 'value' in OCPE concerns the social distribution of labour, or the distribution of social labour among the branches of production.

MARX'S CONCEPT OF 'REAL VALUE'

At first sight Marx in 1844 seems to be following Engels word for word, but this proves to be wrong upon a second look. There are big differences between them, as was the case of 'the Luther of political economy'. Marx uses Engels' words by recasting and giving them deeper meanings. 'Value' is no exception. This hardly needs any examples. A comparison of Marx's brief summary of Engels' OCPE[22] with Engels' original text reveals that value is grasped as a capitalist relation more clearly by Marx than by Engels. This is not an accident but a result of Marx's methodological advantage over Engels. As we have already seen, Marx understands economic categories as a theoretical expression of capitalist relations of production and commerce more clearly than Engels. This makes the first point.
The second point is that Marx, like Engels, distinguishes value from price and evolves price from value. This requires an example.

The problem of defining this value [23] more precisely, as well as showing how it becomes price, must be dealt with elsewhere (3 MEC 219, EW 268).

The third point is that Marx, like Engels, determines value by cost of production and utility and criticises both Ricardo and Say. This requires only the notorious passage in Notes on Ricardo.

In the determination of value Ricardo adheres to production costs only, whereas Say to utility (usefulness) only (MEGA2, IV-2, S.392).

As this note forms the grounds for the assertion that Marx in 1844 negated the Ricardian value theory, let us devote some space to this problem.
To begin with, Marx keeps to this proposition through his life. The point is that for Marx the determination of value by production costs is equivalent to that by supply and demand[24]. The same criticism is repeated in Wage-labour and Capital" (1848) and Notes on Ricardo (1851-1852).

Similarly, the labour which the worker sells as a use value to capital is, for the worker, his exchange value, which he wants to realise, but which is already determined prior to this act of exchange and presupposed to it as a condition, and is determined like the value of every other commodity by supply and demand; or, in general, which is our concern here, by the cost of production, the amount of objectified labour . . . (Grundrisse, Pelican ed., p.306).

However, it would be usefull to quote the opening paragraph of Notes on James Mill and show how Marx has been misinterpreted by commentators.

(1) Both on the question of the relations of money to the value of metal and in his determination that the cost of production is the sole factor in the determination of value Mill succumbs to the error, made by the entire Ricardo school, of defining an abstract law without mentioning the fluctuations or the continual suspension through which it comes into being. (2) If e.g. it is an invariable law that in the last analysis -- or rather in the abstract coincidence of supply and demand -- the cost of production determines value, (3) then it is no less an invariable law that these relations do not obtain, i.e., that value and the cost of production do not stand in any necessary relation. (4) Indeed, supply and demand only ever coincide momentarily thanks to a previous fluctuation in supply and demand, to the disparity between the cost of production and the exchange value. And in like fashion, the momentary coincidence is succeeded by the same fluctuations and the same disparity. This is the real movement, then, and the above-mentioned law is no more than an abstract, contingent and one-sided moment in it (3 MEC 211, EW 259-260. The numbers are mine).

In (2) and (3) Marx criticises both Ricardo's and Say's determinations of value, making an antithesis. (1) and (4) show Marx's own view and form the ground of his criticism. The point is that both Ricardo and Say are one-sided, which is indicated by the antithesis: 'abstract' and 'real' movements. In Hegelian philosophy, 'reality' is the sum total of many elements, and 'abstraction' is separating an element from the other elements. Critics, however, cannot understand this and so misinterpreted 'abstraction' as a total negation of 'reality'.
Now let us move on to the fourth point concerning the only difference in the determination of value between Marx and Engels, i.e., the determination of 'production costs'. Although Engels did not specify it, Marx reduced it to 'labour-time' in The Holy Family [25].

As far as immediate material production is concerned, the decision whether an object is to be produced or not, i.e., the decision on the value of the object, will depend essentially on the labour time required for its production. For it depends on the time whether society has time to develop in a human way (4 MEC 49).

In a preceding paragraph, Marx, on the one hand, criticises Proudhon's confusion between the 'measures of wage' and of the 'value of a product', and, on the other, agrees with his not counting profit or rent in the measure. This suggests that in 'the labour time required for its production' Marx counts not only 'the immediate existence of human activity as activity' but also the amount of labour embodied in the means of production. With regard to this, the following quotation illustrates how Marx recast the Ricardian 'cost of production'. In 1844 Marx read the French edition of The Principles of Political Economy which contains Say's notes. Marx left an interesting note on the Ricardian proposition in "Chapter 2 On Rent", using Say's note to it.

(1) Here Say notes: so far as rent is not a part of the sum total cost for the production of a commodity, rent is not a component part of the natural price but of the market price of the commodity.
(2) Generally, it is very interesting: (3) According to Smith, natural price consists of wage, rent and profit. (4) Land is necessary for production but rent does not enter into the necessary part of production costs. (5) Profit does not either. (6) The necessity of land and capital for production is counted into costs only so far as they require some labour in their maintenance, i.e., only its re-production costs (The numbers are added)[26].

Using Say's logic, Marx excludes profit and rent from 'production costs' in a strict sense, or the sense in which form and substance coincide. As a result, 'production costs' is determined by 'wage' and the 'reproduction costs of land and capital', which is equivalent to labour time expended on production.
Lastly, Marx's value leads us to his theory of 'disposable time', i.e., the dialectic of free time. In the latter part of the quotation above and the following paragraph, he expounds the embryo of his view. In this respect, his value can be said to be the capitalist form of the decision of social production

CONCLUSION

At first sight Marx in 1844 looks as if he were following Engels word for word. However, a closer look clarifies Engels as reread and criticised by Marx. Engels' value theory in OCPE is summarised by Marx but without the expression 'if private property is superseded'. Value is clearly grasped as a capitalist relation, determined in the process of capitalist production and the source of price. The difference originates in their task, method and views on categories. However, OCPE served for Marx as 'a brilliant sketch' on the criticism of economic categories. Engels was closer than anyone else to Marx's critique of political economy. This is why they formed a life-long friendship.
The widely accepted interpretation of the early Marx, however, does not explain this basis of their friendship nor Marx's intellectual development. 'Development' is not a mere 'change' but a type of change in which the later stage includes the former stage as its embryo. For the formation of Marx's value theory, similarities and dissimilarities between the early and the late Marx must be understood beforehand. The late Marx must be re-examined also, first in relation to the early Marx; but no positive meanings in the works of the early Marx have been recognised, e.g. EPM, Notes on Ricardo.
In the formation of Marx's value theory, i.e., in examining the difference in his critique of 'costs of production' between the early and the late Marx, we see only a 'development' but not a 'rupture.' Here we also see the reasons why Marx rated OCPE as a 'brilliant,' but only a 'sketch,' on the criticism of economic categories.

(In memory of Miss Gilian C. Dodd. I would like to thank Dr. Barry Dodd and Dr. Terrell Carver who looked over the draft and checked my English. Naturally, however, any deficiencies are my own responsibility.)

NOTES

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[1]. David MacLellan, Karl Marx Selected Works, Oxford, 1977, p.390.

[2]. Ibid., p.390.

[3]. For detail see n. 4 in my "Ricardo's Value Theory Re-examined", in: Journal of Social Sciences, Takushoku University, Vol. 1, No. 3, 1994. Terrell Carver, "MARX_AND ENGELS'S 'OUTLINES OF A CRITIQUE OF POLITICAL ECONOMY,' "HISTORY OF POLITICAL THOUGHT," Vol.IV, No.2, 1983.

[4]. Theories of Surplus Value, Part III, Progress Publishers, p.500.

[5]. Marx's letter to Kugelman dated 11th July, 1868.

[6]. See chapter II of my "Ricardo's Value Theory Re-examined" in: Journal of Social Sciences, Takushoku University, Vol. 1, No. 3, January 1994.

[7]. Engels sees the highest pitch of the immorality of the economists in Malthus. See 3 MEC 437-438.

[8]. Theories of Surplus Value, Part III, op.cit., p.259.

[9]. For more information on the concepts 'estranged labour' and 'command', see n.5 in my "Marx's First Critique of Political Economy," in: The Review of Takushoku University, No. 190,1991.

[10]. Theories of Surplus Value, Part III, op.cit., p.259.

[11]. Ebd.

[12]. See chapter IV. section A. in my "Individual, Social and Common Property", in: The Review of Takushoku University, No. 199, 1992. (On the 'essence' and 'concept' of private property.)

[13]. Grundrisse, op. cit., p.105.

[14]. See 3 MEC 288, EW 340. Grundrisse is famous for its concept 'the civilising tendencies of capital', but it is not in Grundrisse that Marx formulated the concept for the first time. That which we should notice is that this concept is based on the 'essence of capital'.

[15]. The last few decades saw some assumptions on the writing order of Marx's Notes on Ricardo, Notes on J.Mill, EPM. Irrespective of the order, EPM is not just a collection of notes such as Notes on Ricardo, Notes on J. MIll. Each section of EPM is intrinsically connected. EPM is really worthy of being called "manuscripts". However, The German Ideology is a mere collection of notes. See my "The Editing Problems of The German Ideology, in: Journal of Social Sciencies, Takushoku University, Vol. 2, No. 1, 1994.

[16]. Thus there is no wonder that Soviet Marxists have made all efforts to separate the parts of EPM and to deny the concept 'estranged labour.' EPM is more instructive and critical in understanding Marx's system of political economy, philosophy and socialism (including Soviet socialism) than any other works.

[17]. See, e.g. 3 MEC 216-217 and his criticism of 'crude communism' on 3 MEC 294-296.

[18]. 3 MEC 221, 312, or EW 270, 364.

[19]. Marx agreed publication with Leske of his two volumes of A Critique of Politics and Political Economy, on February 1 1845. In the first half of October 1844, in his letter to Marx, Engels urged Marx to finish the work as soon as possible. However, Marx did not follow this suggestion. This indicates the difference in thoroughness between them.

[20]. See Marx's concept 'abstraction' below.

[21]. On the production in future relations Engels writes:

Carry on production consciously as human beings -- not as dispersed atoms without consciousness of your species -- and you have overcome all these artificial and untenable antitheses (3 MEC 434).

[22]. Marx's brief summary of OCPE is contained in MEGA2, IV-2, SS.485-488.

[23]. In the manuscript 'value' has been written above 'price'. This does not mean that Marx confused the two concepts. On the contrary, this is a good example that he distinguished 'value' from 'price' at this stage of his stufdy.

[24]. See chapter IV of my "Ricardo's Value Theory Re-examined," in: Journal of Social Sciencies, Takushoku University, Vol.1, No.3, January 1994.

[25]. 'Labour time' can be found in Engels' OCPE. The origin of this term is in Hegel's Philosophy of Right.

[26]. MEGA2, IV-2, S.404.