This article is devoted to the prediction by Engels that commodity production and money will disappear under socialism, and to providing an explanation of how this prediction arose and on what basis. Logically, this prediction is linked to the thesis on the abolition of private property. An analysis of the works of the young Engels shows that this thesis has its roots in the profound personal impact made on him by the miseries of the workers, and in his sympathy for the exploited and oppressed. Also leading Engels to his conclusions on the need to abolish private property were his familiarity with the works of the French enlightenment and with philosophical literature that was advanced for the 1840s; his participation in the circle of the Young Hegelians; and later, his acquaintanceship with activists of the incipient workers��� and communist movement. The prediction by Engels that commodity production and money would disappear under socialism has not been realised, although he himself grasped the important problem for socialism of income inequality. Nevertheless, Engels did not pose the main question, which necessarily is that of the economic mechanism of associated production, that impels the producers to create the most efficient means of production on their own initiative. The experience of the USSR shows that directly setting the tasks of society on the basis of production volumes gradually reduces the stimuli to maximise labour efficiency, and excludes the majority of people from influencing the productive processes. The economy of socialism must have a plan-market character, that is, it must combine elements and institutions of both the plan and the market. The real precondition for reducing the role of commodity-production relations, Engels proposed, was the evolutionary transformation both of production and of people themselves. A struggle against commodity-money relations would not aid in this.