Since I wanted to drop some tables and somebody suggested the below and I did it:
postgres=# drop schema public cascade;
DROP SCHEMA
postgres=# create schema
The error message pops up when none of the schemas in your search_path can be found.
Either it is misconfigured. What do you get for this?
SHOW search_path;
Or you deleted the public schema from your standard system database template1. You may have been connected to the wrong database when you ran drop schema public cascade;
As the name suggests, this is the template for creating new databases. Therefore, every new database starts out without the (default) schema public now - while your default search_path probably has 'public' in it.
Just run (as superuser public or see mgojohn's answer):
CREATE SCHEMA public;
in the database template1 (or any other database where you need it).
The advice with DROP SCHEMA ... CASCADE to destroy all objects in it quickly is otherwise valid.