I recall, but am unable to find, a small study that looked into living in typical American suburbs and driving vs. living in the center city and taking public transit, walking, or biking. As I recall, the authors concluded that either is comparable in total costs for the "average" city. If that's true, then I think it's a strong case for living in the city given that people underestimate how stressful their commutes are and that you'll save time.

Others, especially bicycle advocates, have made the same comparison. If you don't own a car, you can turn your savings into higher rent. In my experience, you'll easily save more money and time going the car-free route. I'd recommend the book How to Live Well Without Owning a Car for an introduction to this lifestyle. Note that this lifestyle is not for everyone, but I do think it's a good idea for a large segment of the population.

Edit: I think this is the "study" I referred to above. It's interesting to see how my memory distorted things; I thought of this as an academic study, and couldn't find it among the papers I saved. No wonder, as it was merely a newspaper column.