“There are not two Smiths (the economist and the moral philosopher). There’s one. And the same holds for Marx. His efforts in Capital are best understood in light of his 1844 Manuscripts.
About twenty years ago I purchased my three volumes of the definitive Charles Kerr edition of Karl Marx’s Capital from the Victor Kamkin bookstore in the Washington D.C. area. Pete Boettke and I were graduate students at George Mason University at the time, and once a month on Fridays we’d go shopping for used book bargains. We were plowing through dusty shelves filled mostly with books by Progress Publishers from Moscow, including the complete collected works of Lenin (which Boettke himself purchased), when I came across this gem.

One of us had mentioned to the other that Capital was Marx’s most mature work as an economist. The clerk in the store overheard us, and, in a Russian accent, barked out in protest “Marx was no economist!” We had a small exchange of words—too short to constitute a debate—while we purchased our books. She sneered at us on our way out.

That the clerk insisted Marx was no economist is, in a way, understandable. After all, look at the book’s subtitle: A Critique of Political Economy. Marx was not working within the tradition of the great classical political economists—honing and refining the positions of Smith, Ricardo, or Say. That tradition emphasized the self-regulating features of a free market system—the invisible hand concept—explained by economic laws. Marx instead sought to expose what he saw as the inherent contradictions of capitalism, and demonstrate that the classical economists confused ideological presuppositions for universal economic principles. His effort was not only an attack on free market capitalism, but also a radical critique of the emerging discipline of economic theory, a discipline that he rejected as being faulty at its core. The invisible hand is a mere charade, Marx tells us. What is really at work is something more like an elusive but deadly claw, currently choking the working class but, ultimately, the capitalists themselves. The classical economists are blind to this reality.

As Marx put it:

Classical political economy nearly touches the true relation of things, without, however, consciously formulating it. This it cannot so long as it sticks in its bourgeois skin. (Vol. I, Ch. XIX [par. VI.XIX.20], p. 594.)

(Notice he says nearly, not merely.) Marx sought to pierce the “ideological veil” of capitalism, to get at its real systemic operations, which are found in the material, economic realm. This is the nature of Marx’s treatise.

But if Capital wasn’t the work of an economist, then what was it?

I suppose our clerk would say he was a scientific socialist, the term Marx used to distinguish himself from both the classical political economists and especially the socialist do-gooders of his day, whom he derided as utopian socialists. On the one side you had the economists cheering the rise of capitalism, and the wealth that it generated, through a set of economic principles such as the laws of supply and demand, comparative advantage, and the long-run equilibrating properties of a competitive price mechanism. They promoted a sophisticated theory that emphasized a kind of social rationality that surfaces when people are free to pursue the projects which interest them. On the other side you had the socialist critics of capitalism, who bewailed many of the social effects of the development of the factory system, the technical refinement of the division of labor, and the rise of wealthy capitalist producers. These critics ranged from Robert Owen, a wealthy industrialist himself, who devoted much of his own wealth to form cooperatives and housing projects for the working class, and attempted to persuade other capitalists to take up the cause, to nutty theoretical dreamers like Charles Fourier, who offered detailed blueprints of an ideal socialist community. (And when I say detailed, I mean down to the exact minute when “the hierophant calls for the hymn by striking the first three bars on a tuning fork” to prepare the socialist community for the promise of the new day!1)

In Marx’s view, neither side—the defenders or the critics—appreciated the dialectical process. Neither side understood that capitalism was only an historical phase—albeit a necessary historical phase. The economists thought they discovered universal economic principles at work, when, in fact, they became mere dupes of a temporary economic order. This becomes most clear in classical economics after Ricardo, which Marx says lost all hope to remain scientific and impartial, and became, instead, mere apologetics. This Marx belittles as vulgar economics:

In France and in England the bourgeoisie had conquered political power. Thenceforth, the class-struggle, practically as well as theoretically, took on more and more outspoken and threatening forms. It sounded the knell of scientific bourgeois economy. It was henceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers, there were hired prize-fighters; in place of genuine scientific research, the bad conscience and the evil intent of apologetic. (Vol. I, Author’s Preface to the Second Edition [par. M.17], p. 19)

Marx saw Bastiat, for example, as “the most superficial and therefore the most adequate representative of the apologetic of vulgar economy.” (Vol. I, Author’s Preface to the Second Edition [par. M.20], p. 20)

The utopian socialists, by contrast, were developing fantastic plans to reform man, reform social institutions, or both. But they failed to see that the system itself was in a continuous, dialectical process of profound change, undertaken by a clash of antagonistic class interests.

Marx would accept neither the views of the economists nor the socialists of his day. Marx argued that man will realize his full potential only after the system has radically changed, after the clash of class interests has ended with a dialectically inevitable revolution.

We find Marx’s concern for human potential in his early work, particularly The Economic and Philosophic Manuscripts of 1844. There he argues that, under capitalism, mere things are treated as beings, and man is treated as a mere thing.The 1844 Manuscripts sets this discussion of Marx’s view of the nature of man—what he is and what he can be—in a dialectical theory. History is the story of class struggle, of human alienation, of ongoing systemic contradictions, but history will inevitably come to an end—the negation of the alienated capitalist order will ultimately yield the synthesis of a fundamentally new order. Socialism will put an end to history, an end to alienation, and finally unleash a “return of man to himself.”

Man will realize his potential only after the system has radically changed. But just what is the system? Marx’s effort in Capital tries to expose the key organizing principle of commercial society. In this way, he was—whether we agree with his theory or not—perhaps the first developer of what would later be called comparative economic systems analysis.

In general, of course, the organizing principle is the market. But more specifically, in Marx’s view, it’s capital itself which dominates the relationships in commercial, “capitalist” society. Understanding exactly what capital is unlocks the riddle of the market system. Marx attempts to do just that in these three hefty volumes.

Marx argues that the classicals failed to understand the nature of capital. They viewed the market system as merely an exchange of commodity inputs—capital, land, and labor—to fetch profits on the commodity outputs. Their downfall was to conceptualize capital as a thing, perhaps as a machine, or even a sum of money, rather than a relationship between people that also takes on the form of social relationships between things:

Capital, Land, Labor! But capital is not a thing. It is a definite interrelation in social production belonging to a definite historical formation of society. This interrelation expresses itself through a certain thing and gives to this thing a specific social character. Capital is not the sum of the material and produced means of production. Capital means rather the means of production converted into capital, and means of production by themselves are no more capital than gold or silver are money in themselves. Capital signifies the means of production monopolized by a certain part of society, the products of material requirements of labor made independent of labor-power in living human beings and antagonistic to them, and personified in capital by this antagonism. Capital means not merely the products of the laborers made independent of them and turned into social powers, the products turned into rulers and buyers of their own producers, but also the social powers and the future … (illegible) form of labor, which antagonize the producers in the shape of qualities of their products. Here, then, we have a definite and, at first sight, very mystical, social form of one of the factors in a historically produced process of social production. (Vol. III, Ch. XLVIII [Par. I.XLVIII.5. The word “illegible” occurs in the original 1909 edition.—Econlib Ed.], p. 948.)

The entire classical theory of the invisible hand, the harmony of interests, the equilibrating properties of a competitive market necessarily collapses as a scientific discipline:

a scientific analysis of competition is not possible, before we have a conception of the inner nature of capital, just as the apparent motions of the heavenly bodies are not intelligible to any but him, who is acquainted with their real motions, motions which are not directly perceptible by the senses. (Vol. I, Ch. XII [par. IV.XII.8], p. 347)

Marx begins Volume I with a lengthy analysis of commodities, their production, and their exchange for money, and develops his notion of commodity festishism in Chapter 1, Section 4. Marx strives to show that the production and exchange of commodities has a dual nature: the market economy really does exhibit a material relation between people (workers are treated as costly inputs in the production process) along with a social flow of things (as is often depicted in sets of simultaneous equations that even to this day is taught to higher-level economics students). Marx says that this is not an illusion. But, the problem is, both the material relationship among people and the social flow of material things hide the fact that both the production and exchange of commodities is also, and fundamentally, established by specifically historical (capitalist) social relations among human beings. The capitalist economy creates a complex flow of goods, a flow that does take on a “life of its own” and thereby deceives economists (and everyday citizens of a capitalist order), because they believe this represents a natural state of affairs.

In The Wealth of Nations (Book IV, Ch. IX [par. IV.9.51], p. 687) Adam Smith went so far as to consider the capitalist structures of commercial society part of the “obvious and simple system of natural liberty. ” And that’s the deception, according to Marx. Capitalism has a systemic property that leads people to believe that they are engaged in free, natural activity—the freedom to accept or quit jobs, the freedom to trade, save, and invest as they see fit, and so on—when, in fact

they belong to a state of society, in which the process of production has the mastery over man, instead of being controlled by him. (Vol. I, Ch. I [par. I.I.136], p. 93)

The market system appears obvious, and simple, and natural, but all along it conceals the fact that people are still condemned to alienation, an alienation even more cruel than that of master-slave relations, because the system encourages them to believe that they are exercising their freedom of choice in the boss-worker relationship. At least most slaves—to their advantage—knew they weren’t free.

For more information, see “Marxism” in the Concise Encyclopedia of Economics (CEE), by David L. Prychitko. See also from the CEE the biography of Karl Marx (1818-1883) and Robert Heilbroner on “Socialism.”

Marx goes to great lengths in Volume I to develop the labor theory of value and demonstrate that profit (or surplus value) can only be created through the hidden, systematic exploitation of labor.2 His discussion in Chapter X on “The Working-Day” is perhaps the most readable for those readers who wish to avoid the technical analysis. Volumes II and III deal extensively with Marx’s explanation of the possibility of disruptive business cycles and economic crisis caused by monetary imbalances, while his discussion of “The Trinitarian Formula” in Volume III, Ch. XLVIII, offers perhaps his most accessible criticism of the classical economists’ explanation of earned income in capitalist society.

You won’t find in Capital some detailed blueprint of a socialist society. Marx does not go so far as those utopian socialists who wasted their time dreaming up fantastic designs. This is indeed largely a criticism of established economic theory. But much of Marx’s views on socialism are implied in both his theory of alienation and his criticism of the economic arrangements of capitalism. Marx believed, without any doubt, that socialist society would put an end to alienation, exploitation, and illusion, by abolishing private property rights, commodity production, wage labor, and money. It would allow man to actually realize his freedom, his praxis potential. Marx takes the future possibility of a totally non-alienated socialist society as a given, and in Capital employs that vision in his critical examination of capitalism. It’s not unlike having a clear and unshakable belief in heaven to judge what constitutes sin here on earth. Marx substitutes socialism for heaven, capitalism for earth, and alienation for sin. He uses his non-alienated ideal as a benchmark to judge and evaluate the features of real-world capitalism.

Marx occasionally offers, in general terms, what a radically different alternative economic system, in short, socialism, must look like. For example, it would be comprehensively planned:

The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. (Vol. I, Ch. I [par. I.I.135], p. 92)

* * *

If Adam Smith’s Wealth of Nations is the locus classicus of economic theory, and the defense of the free society, then Karl Marx’s Capital stands as its most radical alternative. Its historical significance in the socialist movement cannot, of course, be understated. The views in Capital changed the world. The course of time has demonstrated, however, that Smith’s general vision is much more amenable to the human condition compared to Marx’s.

I believe one can best understand Adam Smith’s vision of the “system of natural liberty” by supplementing Wealth of Nations with his lesser-read Theory of Moral Sentiments. There are not two Smiths (the economist and the moral philosopher). There’s one. And the same holds for Marx. His efforts in Capital are best understood in light of his 1844 Manuscripts.Capital, his magnum opus, is the work of Marx the mature economist, but it is also something more than that. It builds upon his earlier philosophical views. He took those notions as a point of departure, and attempted a painstakingly detailed theoretical analysis of capitalism as an alienating and contradictory system.

Capital is a very difficult read in many places, bogged down in technical theoretical discussions that no longer seem relevant. In other places it’s exciting to read. One can begin to understand how Marx captured the imagination of revolutionaries, and how Marxism itself became an ideological program, with its own contradictions, confusions, dogmas, and illusions.


Fourier, Charles. 1983. The Utopian Vision of Charles Fourier: Selected Texts on Work, Love, and Passionate Attraction. Translated, edited, and introduced by Jonathan Beecher and Richard Bienvenu. Columbia, MO: University of Missouri Press.

Marx, Karl. 1906. Capital, Vol. I: The Process of Capitalist Production. Translated from the 3rd German edition by Samuel Moore and Edward Aveling, and edited by Frederick Engels. Chicago: Charles H. Kerr and Company.

—————. 1909. Capital, Vol. II: The Process of Circulation of Capital. Translated from the 2nd German edition by Ernest Untermann, and edited by Frederick Engels. Chicago: Charles H. Kerr and Company.

—————. 1909. Capital, Vol. III: The Process of Capitalist Production as a Whole. Translated from the 1st German edition by Ernest Untermann, and edited by Frederick Engels. Chicago: Charles H. Kerr and Company.

—————. 1964. The Economic and Philosophic Manuscripts of 1844. Translated by Martin Milligan, and edited by Dirk J. Struik. New York: International Publishers.

Prychitko, David L. 1993. “Marxism,” in David R. Henderson, ed., The Fortune Encyclopedia of Economics. New York: Warner Books, pp. 123-127.

Smith, Adam. 1759. The Theory of Moral Sentiments.

—————. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations.


See, for example, Fourier (1983). It’s hilarious.

I’ve previously covered the topics of Marx’s labor theory of value, and alienation, in more detail in Prychitko (1993)


*David L. Prychitko is the author of Marxism and Workers’ Self-Management: The Essential Tension (Greenwood Press, 1991), Markets, Planning and Democracy: Essays after the Collapse of Communism (Edward Elgar Publishing, 2002), and, with Paul Heyne and Peter Boettke, The Economic Way of Thinking, 10th ed. (Prentice Hall, 2003), an introductory textbook which has recently appeared in Japanese and Hungarian translations. A professor of economics at Northern Michigan University and faculty affiliate in the Program on Markets and Institutions, James M. Buchanan Center for Political Economy, George Mason University, Prychitko was awarded the Cecil and Ida Greene Honors Chair in economics at Texas Christian University in 2004.