Imagine there existed a Narrow Tram: a streetcar or light rail train that is only about half as wide as the streetcars and LRTs most cities use today.
Narrow trams could fit more easily on narrow streets where there is not otherwise room for a transit-only lane. They might also squeeze into unused edges of existing railway or expressway corridors, where they could avoid red lights. On wider streets, narrow trams could have room for double sets of tracks in each direction: one lane to provide local transit service, the other for express.
For passengers to comfortably navigate such narrow vehicles, each narrow tram could have an unprecedentedly large number of doors – the more doors the better. Each door would open only if passengers indicate they are getting on or off at that precise section of the vehicle. Platforms would tell passengers in advance which sections of each approaching narrow tram are crowded. Fold-up chairs would be located along one side of the vehicle, only one chair per row. Some chairs could be sideways-facing to let people to sit together, others would be front-facing.
In certain cases, narrow trams could perhaps free up enough room for platforms on both their sides – the Spanish Solution – in order to simplify boarding and alighting and allow passengers to transfer very easily between local and express vehicles. Spanish Solution narrow trams might have to have even fewer seats, but this might be manageable, since express trams would be able to travel further in less time than conventional transit, so passengers might be more willing to stand. Plus, with multi-multi-door vehicles and smart-platform systems, you might be able to put chairs close to doors without creating passenger blockages, so the number of chairs might not have to be reduced too much even with the Spanish Solution’s addition of doors along both walls.
Narrow tram systems that have separate local and express tracks might also eventually help to facilitate the use of freight trams, at least during times of day when there is not a high demand for passenger transit. With two tracks per direction, a narrow freight tram could linger in one spot to be loaded or unloaded without blocking other trams behind them. If, for example, the process of loading and unloading goods from trucks and trains becomes automated, leading to an increase in multi-modal freight transport or nighttime freight delivery, freight trams might become useful in urban areas because of how quiet, clean, and battery-free they are. Narrow trams might also serve well as freight trams by being able to squeeze into the edges of certain railway or expressway corridors where industrial and freight-transport infrastructure already exists.
Narrow trams might also allow for longer vehicles, at least on their express lines or on grade-separated sections. They could have more room to carve out the wide turns needed by longer vehicles, since their narrow size might allow them to make diagonal cuts to avoid intersections without taking up too much valuable street-corner real estate. Such diagonal cuts would also them to have useful indoor stations. Their longer length could help compensate for narrow trams’ smaller number of passengers per row. Eventually, perhaps, driverless vehicles (at least, in grade-separated corridors) might also allow for viable narrow trams that do not have long lengths.
In some cases, it would not just be the width of the vehicle that would be narrow, but also the diameter of the vehicle. A Narrow-Diameter tram would have both a narrow width and a low ceiling. A ceiling height of seven or eight feet, for instance, would be relatively low, yet would not be so low as to make passengers too uncomfortable, particularly given that the plentiful doors and smart-platform system would help prevent passengers from having to fight their way through a crowded vehicle. The benefits of having a lower ceiling and smaller diameter could be significant. Lower ceilings can make it easier to use underpasses or get in and out of tunnels. Smaller diameters also reduce the required size of tunnels. A tunnel with a 7-foot diameter, for example, would have a volume that is only a quarter as great as that of a tunnel with a 14-foot diameter.
Hypothetically – very, very hypothetically – a city could even take an existing subway tunnel and repurpose it to run local and express narrow subway trains in each direction, with the express narrow trains being so narrow that they could able to bypass the local trains at certain points. Even more unrealistically, a city could build a futuristically tubular train with a diameter of only, say, 4.5 feet, in which most passengers would have to sit in order to fit on board, like in a car. A 4.5-foot-diameter tunnel would have a volume only around one-tenth that of a 14-foot one.
Of course, such extreme steps are not needed. There might be benefits to be gained from making vehicles even just a little bit narrower than they are today. Technologies such as digital payment systems that make it easy to board any door on a vehicle, transit apps that make it easy to choose between local or express vehicles, the possibility of smart-platforms that can indicate which sections of approaching vehicles are crowded, and perhaps eventually also the possibility of automation, might all make narrower trams more viable than they have been until now.
Future Economics 
I cannot say I am convinced. The space gains involved would be very minimal – you would still need a centre aisle for safety reasons (otherwise, what if one door gets stuck?), so you’re only going to gain a couple of feet, which won’t make a giant difference to land requirements. Meanwhile, there’s a reason carriage designs like this were phased out a couple of decades ago: there are many costs!
The big thing is just that train providers like to have as much open space as possible, as it encourages standing, which is more efficient. In particular, high density packing is both more necessary and more acceptable on short, inner-urban journeys, the very sort trams are useful for. But then there’s the problem of the doors. My part of the country was one of the last places to get rid of your design, but by the end it was becoming a legal issue: because doors are the main site of danger, having vastly more doors makes trains more dangerous. Particularly because the design makes it harder to use modern sliding doors (as they have less room to slide into – old slamdoors can take up the whole side of the train, but sliding doors would mean you could only have half as many doors. And of course doors are also expensive. And, indeed, TRAINS are expensive – even if you only reduce a 4-seat aisle to a 2-seat aisle, without without thinking about more modern, standing-based designs, you’re then talking about doubling the length of the train, and it’s much cheaper to build a train a little wider than to build twice as many carriages. And, accordingly, station platforms twice as long – particularly for trams, one of whose advantages is meant to be not requiring huge specialised platforms.
And if you change the gauge, then you lose two of the big advantages of trams. First, trams can use road lanes – but if the tramlane is much smaller than the road lane, either you’re using the road lanes anyway (and not gaining anything from the narrower tram) or you’re adding specialised tramlanes, which might be cheaper than adding specialised WIDER tramlanes, sure, but the whole point of the tram is meant to be that you don’t have to use specialised tramlanes everywhere. And second, trams can use railway lines – they can reuse disused railway tracks, they can incorporate sections of the mainline into their routes where possible, and they can use mainline tracks to deliver new trams, or take malfunctioning trams to a repair site, or even just take unused trams to a depot. As soon as you abandon standard gauge, all of that becomes much more difficult – and at the same time, the carriages themselves become more expensive because they’re more bespoke. So you’d need really big benefits to merit doing this, and I don’t see what they are.
I’m certainly no transit expert, but I think narrow gauge isn’t an exotic new technology that might find an application one day. It’s a technology that’s been around for over a century, and the fact that it is disprefered is probably not a coincidence or conspiracy!