Network development around the Carpathian Basin (borders are that of the Hungary part of Austria-Hungary). Watch how the network developed from Vienna-centered to Buda/Pest-centered.

The initial private railways were slowly bought up and merged into a national railway. I am no fan of the Great Men theory of history, but here one man with single-minded determination really had a central role.

Gábor "Iron Minister" Baross was state secretary and then transport minister from 1883 until his death in 1892. His primary focus was on railways, and in that field, against heavy resistance, he pushed through the bulk of nationalisations, accelerated construction, created railway officers' schools, pursued Central European Time -- and he invented and introduced zone pricing of railway tickets.

Until then, most railways either calculated ticket price by multiplying travel distance with a fixed rate per unit distance, or set prices for every possible relation. Zone pricing, in contrast, means that ticket price is the same within certain distance ranges or within certain areas.

For the traveller, zone pricing also brings the freedom to board or leave a train at different stations within the same zone. For policymakers, zones offer the possibility of non-linear pricing, to encourage (or discourage) certain kinds of travels. (And for cashiers, it reduces the variety of tickets.)

Here are two present-day examples:

Current 1st (green) and 2nd (blue) class ticket prices of the Hungarian State Railways: example of zones as distance ranges. (1€ ~= 250 Ft, or one small tick in the Y axis of the diagram.)

Zones A (white), B (light grey), C (grey) of the mass transit system of Berlin. You can buy €1.20 short-distance tickets (f.e. up to 3 stations on the subway), €2.10 AB, €2.40 BC and €2.70 ABC multiple-zone tickets, normal railway tickets according to distance range in zone C.

But back to the late 1880s, when Hungarian railways were in difficulties, and wanted to get back in black by raising ticket prices. But Baross wanted to do the opposite with his zone pricing. This first zone pricing had distance ranges (though also a regional element: to boost the then desired centralisation, travels via Budapest had to be priced as two successive travels), with the greatest reductions (up to 80%) for the shortest and longest distances.

Baross argued that the loss from price cuts will be more than made up by the extra income from boosted traffic numbers. This revolutionary idea was a mirror image of one argument for tax cuts used by neolibs today, that economic growth will raise tax revenues back to the old level: instead of counting on the sustained success and goodwill of the richest, it was counting on the poorest to go trying their luck on now affordable trains.

Baross's idea made both domestic and international furore. Some quotes, first strongly sceptical ones:

"...and here we see the theory of zone pricing in its full beauty, to open the railway for those, who were barred from it. This is the professed goal! But why stop half-way? The most ideal would be if everyone would travel at public expense..."
(Journal des Chemins de Fer)

The State can commit every madness, because it does so at the expense of taxpayers. Do they dare to claim that traffic will grow so much that the giant income deficit will be made up for by that?
(Journal des Transports)

Note the French sources -- a reason may have been that one of the last major private railways Baross would go on to nationalise was held by French investors. Other observers were fearful a different way:

"The country that is first to apply the cheap zone pricing will draw the flood of Europe's traffic closest to itself."
(Zeitschrift für Eisenbahnen und Dampfschiffahrt)

But Baross won the policy battle at home, and his great gamble began on 1 August 1889.

And it was an extreme success.

In just 11 months, passenger numbers grew by 7 million, more than doubling from the year before, and the move brought a sizable overall profit. In two more years, traffic again doubled, and a similar pricing was introduced for freight. The Hungarian Royal State Railways would stay profitable until WWI.

Zone pricing then quickly spread around the world, among the first was the city of Prague. Baross could see his success only for a short time, shortly after presenting another landmark proposal (draft of a law introducing workers' health insurance) he catched typhoid fever and died aged only 44.

Links to earlier train diaries:

More Occasional Train Blogging

23/01/2007 by richardk: High Speed Trains
29/01/2007: Central European Time
11/02/2007 by rg: Bye Bye Planes
18/02/2007: Hump-Nosed Trains
01/03/2007 by MonteMontana: Fastest Steam Locos
08/03/2007: Springtime Romantic Roundtrip
23/03/2007 by BruceMcF: America, as it turns out, was Made for HSR
03/04/2007: New Rail World Speed Record
03/04/2007 by redstar: TGV: Triumph of the State