A brilliant excerpt from Rothbard's Ethics of Liberty, in which he critiques the idea of a 'limited, laissez-faire government':

But there are other fatal flaws and inconsistencies in the concept of limited, laissez-faire government. In the first place, it is generally accepted, by limited-government and by other political philosophers, that the State is necessary for the creation and development of law . But this is historically incorrect. For most law, but especially the most libertarian parts of the law, emerged not from the State, but out of non-State institutions: tribal custom, common-law judges and courts, the law merchant in mercantile courts, or admiralty law in tribunals set up by shippers themselves. In the case of competing common-law judges as well as elders of tribes, the judges were not engaged in making law, but in finding the law in existing and generally accepted principles, and then applying that law to specific cases or to new technological or institutional conditions. The same was true in private Roman law. Moreover, in ancient Ireland, a society existing for a thousand years until the conquest by Cromwell, “there was no trace of State-administered justice”; competing schools of professional jurists interpreted and applied the common body of customary law, with enforcement undertaken by competing and voluntarily supported tuatha , or insurance agencies. Furthermore, these customary rules were not haphazard or arbitrary but consciously rooted in natural law, discoverable by man’s reason. But, in addition to the historical inaccuracy of the view that the State is needed for the development of law, Randy Barnett has brilliantly pointed out that the State by its very nature cannot obey its own legal rules. But if the State cannot obey its own legal rules, then it is necessarily deficient and self-contradictory as a maker of law. In an exegesis and critique of Lon L. Fuller’s seminal work The Morality of Law , Barnett notes that Professor Fuller sees in the current thinking of legal positivism a persistent error: “the assumption that law should be viewed as a . . . one-way projection of authority, originating with government and imposing itself upon the citizen.” Fuller points out that law is not simply “vertical”—a command from above from the State to its citizens, but also “horizontal,” arising from among the people themselves and applied to each other. Fuller points to international law, tribal law, private rules, etc. as pervasive examples of such “reciprocal” and non-State law. Fuller sees the positivist error as stemming from failure to recognize a crucial principle of proper law, namely that the lawmaker should itself obey its own rules that it lays down for its citizens, or, in Fuller’s words, “that enacted law itself presupposes a commitment by the government authority to abide by its own rules in dealing with its subjects.”

But Barnett correctly points out that Fuller errs significantly in failing to apply his own principle far enough: in limiting the principle to the procedural “rules by which laws are passed” rather than applying it to the substance of the laws themselves. Because of this failure to carry his principle to its logical conclusion, Fuller fails to see the inherent inner contradiction of the State as maker of law. As Barnett puts it, Fuller fails in his attempt because he has not followed his own principle far enough. If he did, he would see that the state legal system does not conform to the principle of official congruence with its own rules. It is because the positivists see that the State inherently violates its own rules that they conclude, in a sense correctly that State-made law is sui generis . However, Barnett adds, if Fuller’s principle were carried forward to assert that the “lawmaker must obey the substance of his own laws,” then Fuller would see “that the State by its nature must violate this commitment.” For Barnett correctly points out that the two unique and essential features of the State are its power to tax—to acquire its revenue by coercion and hence robbery—and to prevent its subjects from hiring any other defense agency (compulsory monopoly of defense). But in doing so, the State violates its own laws that it sets down for its subjects. As Barnett explains, For example, the State says that citizens may not take from another by force and against his will that which belongs to another. And yet the State through its power to tax “legit­imately” does just that. . . . More essentially, the State says that a person may use force upon another only in self-defense, i.e. only as a defense against another who initiated the use of force. To go beyond one’s right of self-defense would be to aggress on the rights of others, a violation of one’s legal duty. And yet the State by its claimed monopoly forcibly imposes its juris­diction on persons who may have done nothing wrong. By doing so it aggresses against the rights of its citizens, something which its rules say citizens may not do. The State, in short, may steal where its subjects may not and it may aggress (initiate the use of force) against its subjects while prohibiting them from exercising the same right. It is to this that the positivists look when they say that the law (meaning State-made law) is a one-way, vertical process. It is this that belies any claim of true reciprocity. Barnett concludes that, interpreted consistently, Fuller’s principle means that in a true and proper legal system, the lawmaker must “follow all of its rules, procedural and substantive alike.” Therefore, “to the degree that it does not and cannot do this it is not and cannot be a legal system and its acts are outside the law. The State qua state, therefore, is an illegal system.”