Here Marx sets out the transformation problem in a letter to Engels. The first volume of Capital was published in 1967. So this is another instance of Marx distinguishing labor values and prices of production before publication of Capital . This post is the second in a series I am working on in which he sets out critical parts of the (critique of) political economy in Capital in letters to Engels. As I understand it, the concept of absolute rent was original with Marx.
Marx criticizes Ricardo for not distinguishing the labor embodied in inputs in production from their cost price. Is the distinction between cost price and prices of production clear in this letter? Maybe not. He goes on here about rent. He assumes that the organic composition of capital is lower in agriculture than in industry. Hence, for Marx, more surplus value is generated in agriculture, for a given expenditure of capital, than in industry.
2 August 1862