Berlin, as you may or may not have heard, is among the coolest cities in Western Europe. This is linked to the fact that it’s one of the cheapest large cities in the region. Lower rents mean cheaper goods and services, which everyone likes. But they also mean that funkier, cooler, more offbeat retail establishments can thrive. And they make it a good place for artists and the like to live. This isn’t, however, driven by any public policy miracle. It’s just that Berlin is really economically dysfunctional in part because it’s really an Eastern European capital trapped in Western European country.
You see similar things in the US, of course. But one difference is that high-unemployment, low-rent American cities tend to have a ton of violent crime, whereas Berlin has approximately the murder rate of Lincoln, Nebraska:
As Atrios is fond of pointing out, it’s not as if middle class residents of cities like Washington DC (where we have a particularly unappealing high crime/high rent combo) and Philadelphia spend our time living in terror of violent crime. But it is true that both the crime and the crime-evading behavior are pretty costly, and in particular make it very difficult for the residents of the poorer areas of the city to fully seize advantage of the economic opportunities afforded by cheap rents.