why detached houses on large lots are replaced by townhouses. The high transaction costs of land use readjustment explain why this process does not happen quickly. When land becomes more expensive, developers substitute capital for land by building taller buildings, using less land per unit of floor space. This constant creative destruction is what allows cities to adapt to changing consumer demand and to new technology.

Because adjusting to a new use is expensive, only a small fraction of the developed urban land is ever submitted to the market forces just described. A large part of the urban land supply is allocated each year by regulation or by government acquisition through eminent domain. The majority of this administratively allocated land is used for roads, parks, railways tracks, utilities, government buildings, and more. As a consequence, the possibility of rapid changes in land use and density, which could improve the productivity of cities, would happen very slowly.

I am not arguing that the value of the land on which roads and parks are built should be constantly updated and that alternative, more financially rewarding uses should be constantly explored. Obviously, large areas of a city have to be devoted either to public goods, which should escape the rigors of the market, or to potentially private goods, such as roads, which are almost everywhere treated as pure public goods. But calculating what proportion of the land area developed each year is submitted to market forces could be a good indicator of how the scarce land is used, underused, or wasted.

I have tentatively tried to measure how the 2,682 hectares of land developed in Ahmedabad over 2000–10 had been allocated (figure 5). Not perfect, the measure is probably accurate enough to help guide future land policy. It is based on existing statistics, interpretations of Google Earth imagery, and the preliminary results of an ongoing study on public land use.

Ahmedabad is probably typical of land use in large Indian cities and reflects Indian land development practices and regulations. The analysis of the flow of land developed in cities outside India would certainly show different results. The purpose of measuring Ahmedabad’s greenfield land allocation is to show a method for comparing across cities the transformation of land from agricultural to urban use and the transformation of developed land into floor space.

How many hectares of rural land have to be developed to produce 1 hectare for building housing, industries, and commerce? Every mayor and urban planner should know this ratio for their city. From the preliminary land study in Ahmedabad, the ratio between developed land and salable land is 3.3. That is, under current development practice in Ahmedabad, 3.3 hectares of rural land have to be developed to allow 1 hectare to be used at its highest and best use (this includes land developed by the informal sector). On this 1 hectare of land, 1.7 hectares of floor space would be allowed to be built by current regulations. That is, roughly 2 hectares of developed land are required to produce 1 hectare of floor space.

I am not implying that the land allocated for roads, utilities, and government buildings is being wasted—far from it. I am just distinguishing the land set aside for permanent public use from the 15