The Austrian School of economics and the Chicago School of economics are important foundations the economic system favored by modern libertarians —capitalism, where the means of production are privately owned, economic and financial decisions are made privately rather than by state control, and goods and services are exchanged in a free market. Like most mainstream economists, they accept the subjective theory of value, which says that only a buyer and seller, while using information shared and available in the marketplace, can determine how valuable goods or services are to them and thereby set a mutually agreeable price. Libertarians contend that supply and demand, as ordered by the incidence of independent, subjective valuations in a free market, are the only sensible means of establishing prices. Moreover, many economists believe that only prices rendered in a free market can synthesize and communicate the preferences and relevant, time-sensitive data to millions of consumers and producers, alike, and that any attempt to objectify these transactions by a centralized authority will fail. According to these economists, any government intervention such as regulation, trade barriers, or taxes, interfere with this judgement being reflected accurately in the price (though economists often argue that nonstate market failures can interfere with pricing in certain situations as well). Most economists agree that accurate pricing is an important part of efficient markets, and thus important for maximizing economic utility.
Libertarians tend to minimize the number and magnitude of market failures they accept as legitimate, or even ignore them as irrelevant to the question of maximizing rights, and this is one source of criticism from opponents laissez-faire economics. Some libertarians would support this form of capitalism even if one could demonstrate that other economic systems are more efficient from an economic perspective, arguing that the right to property, including ownership of oneself and, by extension, in one's labor, supercedes efficiency. Other libertarians would argue that the empirical evidence demonstrates that property enforcement is necessary to the functioning of society, that various redistributionist schemes and, in particular, state ownership of the factors of production are all bound to fail, and that capitalism ultimately provides a more optimal and equitable distribution of goods to members of society. If the empirical evidence were different, these libertarians claim, their views would change.
Libertarians do not see unequal wealth distribution as a problem, and firmly support the private ownership of land and capital. They oppose mandatory egalitarian redistribution of wealth because this would qualify as initiation of force against individuals and their legitimate property. In addition they claim that this takes capital from the most productive sectors of the economy, and that enforcing economic egalitarianism destroys the incentive for the poor to work[1]. They may further argue that any temporary equality of outcome gained by redistribution would quickly collapse without coercion because people have different levels of motivation and native abilities, and would make different choices based on their differing values. Those that were more productive or traded more effectively would quickly gain disproportionate wealth, others would waste their resources, and some of those would choose to save for retirement or earn little on their own. Some may choose not to generate wealth, preferring to spend their time in other areas they find more fulfilling like non-commercial artistic expression or religious growth—an avenue libertarians do not oppose. However, they do oppose forced subsidization of such unprofitable ventures. Material inequality, they argue, is a necessary outcome of the freedom to choose one's own actions without imposing on others. To the extent that some kind of welfare will exist, libertarians tend to prefer Milton Friedman's negative income tax as an alternative (but not a supplement) to the existing system, arguing that it is simpler and has fewer of the perverse incentives of "government handouts."
Theft is considered illegitimate regardless of how long ago it occured, but libertarians tend to oppose reparations that do not involve the thief and victim directly. For most practical purposes, such property is treated as if it were legitimate: if the original participants are long dead, taking property from its current owner and giving it to the victim's descendents is considered initiation of force, and the property should remain with its current holder. On the subject of reparations for slavery, a related issue, Steve Dasbach , executive director of the Libertarian Party said that "Forcing people who had nothing to do with slavery to pay others who were never enslaved is the height of injustice."[[2]] To prevent such complications in the future, libertarians argue that property rights should be strictly protected and enforced, and that all future transfers of wealth would occur through noncoercive means (as in trades or gifts).
Libertarians tend to believe that minimizing the amount of money citizens pay to government, minimizes the ability of the government to fund bad programs and prevents citizens from needing government assistence because they have more of their own money (see "starving the beast"). Because they oppose taxes, libertarians also oppose most programs funded by taxes. Many libertarians oppose government run or regulated schools, hospitals, industry, agriculture, and social welfare programs. Others justify public schools on grounds of efficiency, fairness, or both, though most would prefer a school voucher sytem to the status quo.
Libertarians, especially the Cato Institute have long supported Social Security privatization as a first step to dismantling Social Security[3].
Lastly, many libertarians support the gold standard as opposed to paper currency because they do not trust the government to restrain itself from over-expanding the money supply which would result in inflation. Inflation is commonly regarded by libertarians as a surreptitious method of taxation employed to usurp value from privately-held money without levying an apparent tax and demanding physical transfer of money (see Chicago School of economics)
