I am a moderate libertarian. Most libertarians think that states should be very small or even abolished. I agree with libertarians most of the time. However, I think some governments program can actually be good even though it extend far beyond libertarianism. Instead of ensuring that states should be small, I think states should be privatized. It should have owners, and it should be competing. States already do that. Now I want provinces and towns to be that way too. So yea, local governments are actually fine. Moderately big local governments can be fine for those who like it and want to move there. My idea is that governments can do many thing libertarians hate. However, businessmen, capital owners, and smart individuals are also free to move to area that they like. Notice that this is already happening. We just need to extend that. I think true enemy of capitalism is not big governments. True enemy of capitalism is big central governments. Local governments can be big and that's fine. Just move out if it's stupid. Some of the idea may be wrong. However, the idea here "have a case". For example, it is possible that government solution is better than the market solution. It may not be, but there is a reasonable case that it may. Some goods have very high transaction costs. A resources allocation in case of externalities can be corrected well by governments. Well, government itself is statist. To have one centralized power that guard security is pretty cost effective compared to competing "private polices" that probably wage war against each other. If we have private police, what would stop some dictators to just pay those polices to silent opponents? So a democratic system where people can't easily become dictators is a plus. Confucius once found a woman that avoid paying taxes by not living in a city. The woman's husband was eaten by tiger. The Ethics of Confucius: Chapter V. The State . Here, we can say that a king that found a city provide a service. No body forces that woman to live in his city. In fact, the woman that don't want to pay tax avoid paying taxes and are not punished in anyway. They just get eaten by lions. Hence, founding a city and maintaining it, which is a government and hence statist function, improves economy. US government is a relatively capitalistic countries. Without US government you will have to deal with Osama bin Laden and Kim Jong Un yourself. Most of us do not have the political skills and power to deal with them. So forming a government that's reasonably capitalistic add value to economy. When government build infrastructure, the total economic result can often be more than the cost of the roads. The roads improve land value. Places connected by the road see the land value improves. In a sense, building roads cause "positive" externalities to land owners. Again it's hard to privatize road building. If you just charge toll, you underbuild road. If you ask money from every land owners whose land value improves, then a single land owner that doesn't want to will make the whole thing fail. So a government that decide to tax land and build road can improve economy. Existence of police also add values to economy. Most of us are alive simply because murder is illegal. Here, collapse of government results in chaos and looting. So the government have some benefits there. Governments can also standardize things. Imagine if there is no rule against putting harmful substances in supermarket? Well, that doesn't mean we all gonna get poisons. What will happen is people will only buy from trusted vendors. But then we have very few big businesses that can be trusted. Having governments giving standard that food labeling must be honest, does not contain poison, etc allow more biz to thrive. Now I can go to local small market knowing that that my food will be save. I know that because the owner of that small market will go to jail if it isn't. Some libertarians may say that forced labeling on food is not a statist policy but part of normal government's function in preventing fraud. However, what's exactly the standard is need to be decided by "somebody". So having a government does that may improves economy. Governments also institute marriage. Before paternity tests, there is no easy way to know who the child of a man is. Hence, without knowing that, men cannot know how to inherit his wealth accurately. By institution of marriage, men that knows that he can inherit his wealth to his children will work harder. That improves economy. Of course, now, marriage is totally useless in this regard because we can always check paternity. This is one of a sample where statist action, namely defining marriage, may have been good economically in some situation, but bad in another situation. Governments often and can force people to get vaccinated. That is actually a good thing. People don't die and that means economy improves. Gee. I wonder why not getting vaccinated is legal but porn sometimes isn't. But that's beyond this question. Let's examine something more controversial. Can statist racial discrimination be good for economy? Well, Israel discriminate against muslims in their airport and that leads to safer airports. So that's statist, not libertarian, but add value to economy. The same way, muslim countries discriminate against jews and non muslims. That too add value to the economy because it protects their people's feeling from ideas obnoxious to them. In fact, separating people that don't get along with each other through discrimination actually add value for both people. I am pretty confused with the way liberal democracy works. Why don't they discriminate based on race and religions to the point of absolute? If some people like to kill those who blaspheme Muhammad and some people like to draw Muhammad cartoon, those people shouldn't live together and statist discrimination would improve life of both. There are many problems that government, and only government can solve. The fact that governments' solution make the problem even worse is a different story. Why not privatized some local governments? Ensure that the local governments have owners and try to max out some revenue. The owners can be original voters or investors. See how things go.