Modern Disaster Theory: Evaluating Disaster Law as a Portfolio of Legal Rules

Abstract

Disaster law consists of a portfolio of legal rules for dealing with catastrophic risks. This essay takes preliminary steps toward modeling that metaphor in quantitative terms made familiar through modern portfolio theory. Modern disaster theory, by analogy to the foundational model of corporate finance, treats disaster law as the best portfolio of legal rules. Optimal legal preparedness for disaster consists of identifying, adopting, and maintaining that portfolio of rules at the frontier of efficient governance.

Part I of this essay defines disaster and disaster law. In an effort to develop an analytically rigorous basis for modeling and evaluating disaster law, Part II expounds the principles of modern portfolio theory, a framework for assessing financial returns according to risk. Part III outlines the principles of modern disaster theory as the legal analogue of modern portfolio theory as a branch of finance. Part IV conducts an exercise in applied modern disaster theory. It evaluates legal tools for compensating disaster victims ex post and spreading catastrophic risk ex ante according to the terms of modern disaster theory’s catastrophic preparedness asset model. Part V concludes that modern disaster theory, through the use of sophisticated quantitative methods analogous to those used in financial analysis, promises to place disaster law and policy at the efficient frontier of legal preparedness.

Keywords: modern disaster theory, disaster law, disaster preparedness

JEL Classification: K00, K10