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Market economies are intrinsically unstable. The standard search model of equilibrium unemployment, once solved accurately with a globally nonlinear algorithm, gives rise endogenously to rare disasters. Intuitively, in the presence of cumulatively large negative shocks, inertial wages remain relatively high, and reduce profits. The marginal costs of hiring run into downward rigidity, which stems from the trading externality of the matching process, and fail to decline relative to profits. Inertial wages and rigid hiring costs combine to stifle job creation flows, depressing the economy into disasters. The disaster dynamics are robust to extensions to home production, capital accumulation, and recursive utility. (JEL E22, E23, E24, E32, J41, J63, N12)

While ignorance has long troubled efforts to prevent, prepare for, or manage the aftermath of disasters, relatively little work has been done on the specific varieties of ignorance and the roles they play in disasters. The classical frameworks for decision-making under "uncertainty" are too restrictive, and many prescriptions for disaster management simply call for better communication or more data collection by way of reducing ignorance. Unfortunately, in connection with disasters, ignorance often is irreducible. This article presents a framework for understanding the various kinds of ignorance, and utilizes that framework to provide some insights and tools that may improve disaster preparedness, management, recovery, and learning.

Preparing for, responding to and recovering from natural disasters is as much about human rights as about delivery of relief items and logistics. Adapted from the source document.