Transport and Communication Costs Indexes, 1920-2015

Transport and Communication Costs Indexes, 1920-2015

Source: Airfare data from various web sources (full economy airfare). Computer storage data from John C. McCallum. Sea freight rates data from The Eddington Transport Study (2006) and from UNCTAD (after 1980). Telephone call data from various sources.

Transport and communications costs have considerably declined during the 20th century, notably with technological improvements and through the application of economies of scale. By 1960, maritime transport costs by tonnage were a third of their 1920 level. With containerization, maritime transportation costs further declined. Air transportation costs followed a similar trend, but over a much shorter time frame. Air transportation boomed after WWII with the application of technological improvements (such as the jet engine) and the design of better aircraft in terms of fuel efficiency and comfort. The 1970s were particularly relevant with the introduction of long-distance fuel-efficient planes such as the Boeing 747. However, by 2000 airfares were leveling off on many routes and were slightly going up due to higher operating costs.

Telecommunications are a sector where costs have decreased significantly as well. In 2000, an international phone call was about 1% of its 1940 cost. For instance, while a three minutes phone call between New York and London was $293 in 1931 (1993 dollars), the same call was $1 in 2001,  about 25 cents in 2005 and 5 cents in 2015. With fiber optic cables, telecommunications are accessible throughout the world, particularly through the Internet, which has made long-distance communication close to free and ubiquitous. The current mass diffusion of cell phones has decreased costs further. Another significant wave of innovation involves information technologies, as indicated by the excessively rapid decrease in computer storage costs since their initial introduction (mainframes) in the 1960s. By the 1990s low storage costs enabled the massive diffusion of personal computers, with each new generation of computers faster and cheaper than the previous. Globalization and its related high mobility levels could not have occurred without low transport and telecommunication costs.