The term was coined in 1970 or 1971 by Samuel Edward Konkin III, an agorist. He was dismayed of using limited-government libertarianism and sought to invent the shorter term minarchism. Many minarchists consider themselves also as libertarians. The term is perhaps most often used to differentiate libertarians who believe a state is necessary to maximize individual liberty, from the market anarchists who believe that the state itself should be opposed because it infringes on individual liberty.
Some minarchists use utilitarian arguments, as they compromise the non-aggression principle by taxation. They might use theoretical economic arguments, like Ludwig von Mises's contribution to Austrian economics, or statistical economic research, like the Indices of Economic Freedom.
Some minarchists favor the administration and funding of government services in a small jurisdiction (like a city or county) over a larger jurisdiction like the federal government. This is favored because decisions are presumed to be more efficient when the decision-makers are more local. This also leaves individuals who wish to avoid living or working under a municipality to move to another municipality. Thus, this is reducing the likelihood of government oppression and corruption due to competing municipalities.
Classical liberalism is an ideology that includes state intervention of macroeconomic infrastructure. Classical liberals such as Adam Smith, Alexander Hamilton and Abraham Lincoln supports state intervention of infrastructure. They built railroads, canals, central banks and macroeconomic regulatory infrastructure.
Minarchism, as distinct from classical liberalism, is opposed to classical liberalism. It opposes macroeconomic economic intervention. Minarchists see the only role of the state is to prevent coercion.
Those who emphasize the distinction between classical liberalism and minarchism point out that some of the key thinkers of classical liberalism were far from minarchist:
Adam Smith should be seen as a moderate free enterpriser who appreciated markets but made many, many exceptions. He allowed government all over the place.
While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing public goods. For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a toll). In addition, he advocated retaliatory tariffs to bring about free trade, and copyrights and patents to encourage innovation.
Most of the early proponents of a economic liberalism in the United States subscribed to the American School. This school of thought was inspired by the ideas of Alexander Hamilton, who proposed the creation of the First National Bank and the Second National Bank and increased tariffs (e.g. tariff of 1828) to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from Henry Clay and his American System.
In the mid-19th century, the United States followed the Whig tradition of economic liberalism, which included increased state control, regulation and macroeconomic development of infrastructure. Public works such as the provision and regulation transportation such as railroads took effect. The Pacific Railway Acts provided the development of the First Transcontinental Railroad. In order to help pay for its war effort in the American Civil War, the United States government imposed its first personal income tax, on August 5, 1861, as part of the Revenue Act of 1861 (3% of all incomes over US $800; rescinded in 1872).
However, such a claim appears to be assuming "libertarianism" as a doctrine of absolute laissez-faire. While there are libertarians who oppose all government intervention, there are libertarians who do make exceptions to allow for government intervention and provision of some public goods such as roads and public utilities. Therefore the claim that libertarianism is not the same as classical liberalism because some classical liberals make exceptions to absolute laissez-faire may only hold for a particular type of libertarianism.
Further, some argue that minarchism and liberalism are fundamentally incompatible because the checks and balances provided by liberal institutions conflict with the support for complete economic deregulation offered by most minarchists. However, arguments over the similarities are made difficult by the large number of factions in both classical liberalism and minarchists. For example, minarchist libertarians are not necessarily in favor of complete economic deregulation in the first place and often support tax-funded provision of a select few public goods.
Alan Ryan, a former professor of Politics at Princeton University, argues that the claim from
contemporary libertarians...that they are classical liberals...is not wholly true. There is at least one strain of libertarian thought represented by Robert Nozick's Anarchy, State and Utopia that advocates the decriminalization of 'victimless crimes' such as prostitution, drug-taking and unorthodox sexual activities. There is nothing of that in John Locke or Adam Smith.
Some minarchists include in the role of government the management of essential common infrastructure (roads, money); some include schools, hospitals, social security in such essential infrastructure.
Milton Friedman described Hong Kong as laissez-faire state and he credits that policy for the rapid move from poverty to prosperity in 50 years. Much of this growth came under British colonial control prior to the 1997 resumption of sovereignty by the People's Republic of China. Note that the economic freedom scales are relative, and Hong Kong may not be considered "laissez-faire", especially those who identify with the Austrian school. Central banks, school regulations, environmental regulations and government ownership of housing are some examples of economic intervention in Hong Kong.
Some libertarians argue that anarcho-capitalism is the only logically consistent form of libertarian belief. Such views are often voiced by deontological libertarians, though consequentialist libertarians may argue that laissez-faire is more compatible with utilitarian values (in the manner of Friedrich Hayek, Ludwig von Mises or Milton Friedman).
Also, some libertarians believe that the concept of "constitutionally limited government" is a fallacy.
Murray Rothbard was a prominent critic of minarchism. As an anarcho-capitalist, he argued that government defence is inefficient. He criticized libertarian centralists, who are laissez-faire activists for supporting geographically large, minarchist states. In his book Power and Market, he argued that libertarian centralists support a unified minarchist world monopoly government.