Price increase for public transport drastically higher than for cars. Explainer.
The Swiss federal price watchdog office put out an interesting report and graph. The top blue line shows the cost of public transport compare to 1990, where 1990 is normalized to 100. Nominal price has gone up twofold. By contrast the price of going by car, the purple line, has not even risen by a quarter.1
What can explain this, and do we expect similar trends in other countries?
Here are my two explanations:
1.) Baumol's cost disease: William Baumol observed that prices of services rise much faster over time than prices of tradable or industrially produced goods. His explanation ist that the share of labor in the former is higher, and moreover it is hard to save on labor there. Think of a classical orchestra. The graph gives price development for a range of goods and services in the US (source: Wikipedia)
2.) Insofar as manufactured goods are inputs, public transportation is at a distinct disadvantage. Inputs like trains, and other railroad equipment are demanded at only small numbers and are often country or even railroad line specific. Thus there is much less progress in both quality and price over time for cars than trains. Just as a silly example, AC in cars tends to come included and work. In trains AC is a frequent problem. Or, to take a similar example, where low numbers lead to problems, take the airline industry. Both Airbus and Boeing have issues in production (either in-house or with engine suppliers). This means there is a massive shortage of aircrafts and waiting times of years. In the car industry, wait times are rare, as during Covid or for a few highly demanded sportscars. In the car industry new models are released in a matter of years, whereas in trains and aircrafts the same model is produced for decades. The reason the car industry does better in terms of technological progress, availability and price over time is volume. It is a real industry, the production of aircrafts and trains is more artisan.
Other countries should have seen similar developments. This is of a course a problem for public transportation. It is subject to Baumol's cost disease as it is as service industry, and even where it uses industrial inputs they suffer from a lack of scale effects and relatedly innovation.
The report is available in German at https://www.preisueberwacher.admin.ch/dam/pue/de/dokumente/newsletter/newsletter_06_24.pdf.download.pdf/Newsletter_06_24_d.pdf