Vertical Integration and Capital Theory: a comment

The author, in this comment, replies to a criticism made by Johan Deprez in his article “Vertical Integration and the problem of fixed capital” (JPKE, Fall 1990, vol.33,No. 1, pp.47-64). The Author claims that Deprez’ interpretation of the process of vertical integration misplaces both its function and its purpose. Deprez’ asserts that “vertical integration is a method of synchronic logic compatible to the analysis of natural dynamics in a system without structural change… it ultimately fails to capture important diachronic considerations”. The author does not accept the negative propositions nor the implicit assertion that vertical integration is a development of “synchronic thinking”. The process of vertical integration goes beyond both synchronic and diachronic thinking. Vertical integration IS A WAY OF LOOKING AT THE ECONOMIC SYSTEM. It takes each physical quantity in the final demand vector as the point of reference, and collapses all the interrelations that are behind it simply into a physical labor coefficient and a physical unit of productive capacity. It does not impose a restriction on the real world. The model is meant to be an analytical device rather than a description of reality.