Sun Apr 8th, 2007 at 04:43:57 AM EST
This diary is a byproduct of my research for the Central European Time diary, having found some nice quotes. It is also relevant to discussion in The Wonders Of Capitalism, so I fast-tracked it.
Let's get back to the last third of the 19th century. This was the era of railway nationalisations in much of Europe. Pioneers were Prussia and the Hungary half of Austria-Hungary. The former pursued it for strategic militaristic reasons. The latter wanted to catch up with Western Europe in industrial development, and even the Manchester capitalist liberals saw railways as essential infrastructure to be developed with central planning.
For a few brief decades, this government push propelled the Hungarian [Royal] State Railways (MÁV) into the forefront of railway development internationally. Other than CET, another development pioneered by MÁV which is commonplace today is zone pricing of tickets.
A restored 19th-century MÁV train, here as guest in Strasshof/Austria. Photo by Wolfgang Grafeneder from DEF
From over there => - afew
To briefly recap what was already told in the timezone diary: Ending the era of stiff imperial control in the wake of the 1848 revolutions, the so-called Compromise of 1867 turned the Habsburg Empire into the dual empire of Austria-Hungary, whose parts had wide-reaching autonomy. The Hungary half used its autonomy to push industrialisation, above all construction of new railways:
Network development within the Carpathian Basin (borders are that of the Hungary part of Austria-Hungary). Notice how the network developed from Vienna-centred to Buda/Pest-centred
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 geographical areas.
For the traveller, zone pricing also brings the freedom of choice to board or leave a train at different stations within the same zone. For policy-makers, 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: example of zones as geographical areas. 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 (zoned according to distance range) in zone C
But back to the late 1880s, when the (private) railways in Hungary were having difficulties, and wanted to get back in the black by raising ticket prices. However, Baross wanted to do the opposite with his zone pricing. This first zone pricing had distance ranges, with the greatest reductions (up to 80%) for the shortest and longest distances. (There was also a regional element: to boost the then desired centralisation on the capital, travels via Budapest had to be priced as two successive travels.)
Baross argued that the operators' 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 the now popular neo-liberal argument for tax cuts ("extra economic growth due to tax cuts 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 going off to try 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 to 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 it will make up for the giant income deficit?
(Journal des Transports)
Note the French sources: a reason for the special and especially negative attention may have been that one of the last major private railways Baross would go on to nationalise was held by French investors. Observers elsewhere were fearful in 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 at home, Baross won the policy battle, 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 fare reform brought a sizeable overall profit. In two more years, traffic doubled again, 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 to adopt it was the city of Prague. But Baross could only see the beginning of his success: shortly after presenting another landmark proposal (the draft of a law introducing workers' health insurance) he caught typhoid fever and died aged only 44.
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