Engels discusses the origin of the Marxist theory of value in Part II, Chapter V of his 1878 book Anti-Dühring confuting the views of the self-styled "socialist" German Professor Eugen Dühring. He does this by first taking issue with Dühring's faulty views and then presenting what he takes to be the correct – Marxist – outlook.

Dühring holds, in the first place, that the primary lesson of political economy is that the rule of wealth (and those who control it)throughout all world history is to be understood, in his words, as "economic power over men and things." Engels rejects this opinion for two reasons. First, the wealth associated with the ancient tribal and village societies at the basis of civilization was in no way created my "domination over men." These were cooperative non-class societies. Second, when we do come to more advanced class riven societies the wealth they created was more the domination over things that were then used to dominate people. Throughout history we see "that wealth dominates men exclusively by means of the things which it has at its disposal."

The reason Dühring has explained wealth as primarily the domination over humans is that he wishes to remove the discussion of exploitation from the realm of economics to that morality in order to resuscitate a version of Proudhon's "Property is theft" slogan. Dühring has divided the production of wealth into two great divisions; one of PRODUCTION and the other of DISTRIBUTION.

The production of wealth that is domination over things is GOOD but the wealth produced by domination over humans is unjust and BAD.

Dühring's ideas applied to present day capitalism amount to the following: the capitalist system's production of wealth is fine and good and can be preserved, but the capitalist system's method of distribution is evil and bad and must be abolished. Engel's says views like this, that we can keep the capitalist mode of production and at the same time create a different and just mode of distribution, are "nonsense" and are expounded by people who have never grasped "the connection between production and distribution."

Dühring, having explained the origin of wealth, now turns to the subject of VALUE, and explains to us what "value" is. The value of a thing is, he says "the price or any other equivalent name, for example wages." The idea that Price = Value = Wages is absurd according to Engels.

So, what we have to find out is what value is and how it is determined. Dühring continues with a longer bombastic discussion of value and finally arrives at the conclusion that something's value depends on the labor time it takes to make it. He says: "The extent to which we invest our own energy into them (things) is the immediate determining cause of the existence of value in general and of a particular magnitude of it."

This is pretty pitiful as, Engels points out, this was already known, in the general way Dühring puts it, long before his (Dühring's) own time. And besides that, it is wrong in the way Dühring expresses it. It is not just your own energy – you have to make something with a USE VALUE and you have take into consideration the SOCIALLY NECESSARY labor time it takes to make something.

But Dühring's theory gets worse. Besides the labor it contains there is another factor determining "value" and that is the fact another group of men besides the workers intervene and demand payment for the access to nature and the tools necessary for labor. This is done by force, "sword in hand," and amounts to an increase in the price of commodities and their value so that this group can collect its money. Dühring says this amounts to a "tax surcharge" imposed by force [added to the original or "real" value].

Engels makes short work of this theory. If this is how prices are really set and value determined then what we have is, in effect, monopoly pricing. There are only two ways this could work. First all the sellers are jacking up the prices of their products. So as sellers they are reaping the profits of their "tax surcharge." But since all the products undergo this increase, the sellers, when they are buyers, also have to pay it and the surcharge cancels out. Engels says in this case "the prices have changed nominally but in reality – in their mutual relationship – have remained the same" and Dühring's forced increase in value is an 'illusion.'"

The second way of explaining the increase in value is the "tax surcharge" actually represents real value that the men with "swords in hand" are getting – namely they are getting value added to their products in the form of the unpaid labor of the working people. And this is just Marx's "theory of SURPLUS-VALUE." So Dühring's explanation of the creation of value is either an illusion or it is Marx's theory, a theory which Dühring rejects.

At least Dühring thinks he rejects it. His own theory, however, is just a "slovenly and confused" version of the theory of value proposed by David Ricardo and improved by Marx. Marx says: "The value of commodities is determined by the socially necessary general human labour embodied in them and this in turn is measured by its duration. Labour is the measure of all values, but labour itself has no value."

Dühring is trying to revive a really outmoded view that the value a commodity has is determined by the PRODUCTION OUTLAYS one of which, WAGES, measures what Dühring calls the "expenditure of energy" of the workers. This accounts for the production value of a commodity. The rest of the "value" is the "surcharge" added by the capitalist.

The view that wages = value = price [putting the "surcharge" aside] has been outmoded since the days of David Ricardo, Marx's immediate predecessor. Engels points out this view coexisted in Adam Smith with the view that labour time was the determinant of value but no one following scientific principles uses it now. However, there are still some who try to explain value this way [as true then as in 2010] for it is "the shallowest sycophants of the existing capitalist order of society who preach the determination of value by wages..." and who even say the capitalist's profits are themselves his wages – i.e., "the wages of abstinence", of risk, management, etc. This is the kind of vulgar economics upon which Dühring founds his socialism.

Let's look at the real beginning of human society. At some time in the distant past primitive groups of ancient humans scrabbled about in bands spending most of their time in search of food. This conditioned lasted for untold generations from the time of our separation from the common ancestor we shared with the chimpanzees – about five million years ago. Sometime in the last ten to 20,000 years in our own species some groups (Engel's says "families") began to collect or create more food and useful instruments than they needed for day to day survival. A surplus of subsistence was created beyond the costs of maintaining the population and the surplus even was able to grow to the point of a creating a "social production and reserve fund."

The creation of this fund was a revolutionary historical development and the beginning of all human progress from then until now. However in "history, up to the present, this fund has been the possession of a privileged class, on which also devolved, along with this possession, political supremacy and intellectual leadership." Today, as in the past, this fund is a social fund made up of "the total mass of raw materials, instruments of production and means of subsistence." Every war – imperialist or guerrilla – revolt, revolution, peasant uprising, worker's strike and election is a struggle over the control of this fund between those who control (or wish to control) it and those who make it. Socialism will exist when this fund is controlled by those who actually create it – the productive portion the society – the working people – and it has become THE COMMON PROPERTY OF SOCIETY.

Today this fund, in almost every country in the world, rests in the hands of the capitalist class. This would be impossible if value was determined by wages. In that case the workers would get back in wages the value they created and there would be no capitalist exploitation.

It is, however, the quantity of socially necessary labour expended, not wages that determines value. The workers create more value for the capitalist than he pays out in wages and this fact explains the origin of the profit on capital. It was Marx who discovered that these profits were merely a part, along with other kinds of appropriation, of the surplus value created by the workers. It is our duty as Marxists to educate the working people about these facts. Once the workers are aware of the true origin of THE WEALTH OF NATIONS they will take steps to end their own exploitation and in so doing the exploitation of humanity in general.