>Look at Switzerland, it has all you want - one of the best rail networks in the world, its tiny, rest of public transport is as good as western Europe can get yet... folks still keep buying new cars, highways are getting fuller every year.

It sounds like Switzerland is very poorly managed then. Here in Tokyo, we have absolutely the best rail network in the world, and no, people aren't buying more cars and making the roads more crowded at all. The key here is that owning a car in the city is extremely inconvenient: the roads are frequently very narrow and slow, there's no convenient place to park, the few parking lots available are expensive (and likely not near your destination anyway, unless you're going to some large building (like a mall), and you're not even allowed to own a car in the city unless you have a place to park it, and can prove this to the police. There's almost no street parking. So trying to use a car to get around the city is just not very convenient at all, except for certain trips (e.g., going to a mall that has a parking garage, from your apartment where you're spending a huge extra amount every month for the privilege of a parking space). Taxis are a different matter, though: they exist and are somewhat popular, but they're pretty expensive.

I don't think anyone envisions having no cars; public transportation make it so we don't need cars, and other nudges make it so we have fewer cars than we would otherwise have.