Recently, I was walking through lower Manhattan with my parents. We had just gotten off of the Staten Island Ferry. Due to SuperStorm Sandy, the South Ferry subway station was out of service, so we had to walk about half a mile to the Rector Street station. Along the walk, my mom was talking about the devastation the storm had wrought. Around us were hundreds of workers, trying to restore businesses, fix tunnels and subway stations, and return things to normalcy. My mom commented that the 9/11 attacks were entirely unforeseeable, yet New Yorkers bounced back. Likewise, the SuperStorm Sandy (felt blocks away from the 9/11 Memorial) was entirely unforeseeable, yet New Yorkers will bounce back just the same.

But how do cities “bounce back”? What types of policies can a society have in place that makes them resilient–or in the words of Nassim Nicholas Taleb, “antifragile.” This is the subject of Taleb’s new book, “Antifragile.”

Taleb has a lengthy piece in the WSJ discussing his new book.

But first, what is antifragile?

We should try to create institutions that won’t fall apart when we encounter black swans—or that might even gain from these unexpected events.

Fragility is the quality of things that are vulnerable to volatility. Take the coffee cup on your desk: It wants peace and quiet because it incurs more harm than benefit from random events. The opposite of fragile, therefore, isn’t robust or sturdy or resilient—things with these qualities are simply difficult to break.

To deal with black swans, we instead need things that gain from volatility, variability, stress and disorder. My (admittedly inelegant) term for this crucial quality is “antifragile.” The only existing expression remotely close to the concept of antifragility is what we derivatives traders call “long gamma,” to describe financial packages that benefit from market volatility. Crucially, both fragility and antifragility are measurable.

As a practical matter, emphasizing antifragility means that our private and public sectors should be able to thrive and improve in the face of disorder. By grasping the mechanisms of antifragility, we can make better decisions without the illusion of being able to predict the next big thing. We can navigate situations in which the unknown predominates and our understanding is limited.

Taleb ofers “five policy rules that can help us to establish antifragility as a principle of our socioeconomic life.”

Rule 1: Think of the economy as being more like a cat than a washing machine.

Rule 2: Favor businesses that benefit from their own mistakes, not those whose mistakes percolate into the system.

Rule 3: Small is beautiful, but it is also efficient.

Rule 4: Trial and error beats academic knowledge.

Rule 5: Decision makers must have skin in the game.

I think Taleb’s insights hold great hope for understanding and improving on the legislative and regulatory process, which decidedly are created to create focused, rigid laws aimed at fixing a specific problem, but will invariably break and bend as soon as a slight curveball, let a lone a black swan, is thrown.

I have long sensed, and grappled with the libertarian streak in Taleb’s writing. It appeals to me because it sounds in Hayek and other classical liberal principles. Yet, Taleb is able to make his work appealable to massive audiences. Like this:

Promoting antifragility doesn’t mean that government institutions should avoid intervention altogether. In fact, a key problem with overzealous intervention is that, by depleting resources, it often results in a failure to intervene in more urgent situations, like natural disasters. So in complex systems, we should limit government (and other) interventions to important matters: The state should be there for emergency-room surgery, not nanny-style maintenance and overmedication of the patient—and it should get better at the former.

In social policy, when we provide a safety net, it should be designed to help people take more entrepreneurial risks, not to turn them into dependents. This doesn’t mean that we should be callous to the underprivileged. In the long run, bailing out people is less harmful to the system than bailing out firms; we should have policies now that minimize the possibility of being forced to bail out firms in the future, with the moral hazard this entails. . . .

Because our current system is so complex, it lacks elementary clarity: No regulator will know more about the hidden risks of an enterprise than the engineer who can hide exposures to rare events and be unharmed by their consequences. This rule would have saved us from the banking crisis, when bankers who loaded their balance sheets with exposures to small probability events collected bonuses during the quiet years and then transferred the harm to the taxpayer, keeping their own compensation.

I hope, in my writings based on Taleb’s work, to do the same for viewing the law through this antifragile prism.