Great observation by Rothbard in Living in a State-Run World:
… it is vital to distinguish between two kinds of State activities: (a) those actions that would be perfectly legitimate if performed by private firms on the market; and (b) those actions that are per se immoral and criminal, and that would be illicit in a libertarian society. The latter must not be performed by libertarians in any circumstances. Thus, a libertarian must not be: a concentration camp director or guard; an official of the IRS; an official of the Selective Service System; or a controller or regulator of society or the economy.
This insight also applies not only to questions of employment but also to issues such as privatization and questions of whether state programs are “too inefficient” or not (Rothbard may have addressed this too, elsewhere, more directly, but I have not located it yet. But the idea is that for things in class (1) above, such as roads and dispute resolution, yes these activities should be privatized, and yes, it’s bad that the state performs them very inefficiently. For things in class (2), including also institutions and policies such as jailing drug criminals or tax evaders, these things should not be done at all, they should “privatized,” and we should not want the state to be more efficient at these things–to the contrary, we want the state to be as inefficient as possible at such things.