In my book, I defend the necessity of the state by arguing that enforcement of laws and judicial verdicts must come from a monopoly power that is capable of crushing any individual. It may be objected: "When given the power to 'crush' a person, which man or gang of men has ever instead set him free, or at least abstained from crushing him? If the state has the Godlike power to destroy, what's to expect that it will be Godlike in goodness, too, so that it uses its power for good or more pertinently, not at all?" Well, I am not giving the state an arbitrary power to crush, but the public executive branch the power to inflict punishments in highly specific ways and according to law.
Suppose that Robinson is seeing Smith beating up Jones. He asks the crowd and finds out that Jones allegedly raped Smith's sister or robbed Smith of a lot of money. Rothbard argued that it is 100% permissible, if perhaps somewhat inefficient, for one to take law into one's own hands; and so if Smith has truth on his side, he can personally exact justice, and even seek help from Robinson. If Robinson says with contempt, "Thieves should be hanged," and himself kicks Jones in the stomach before walking away, he, too, is justified. But so then is the state in Robinson's position. Only the problem of financing the executive branch with its cops and prisons remains. If no other solution to pay the bureaucrats other than through taxation is found (and it is anarchists who need to suggest such a solution), then taxes for that purpose alone are justified as praxeologically necessary.
Who is to make law? Is law an arbitrary excretion of the legislature? Is it anything that is "passed" by 500 people in Congress? Ought it to be that no one's life, liberty, or property are safe while the legislature is in session? I contend that the biggest political problem of our time is that the legislatures on every level feel unconstrained in their law-making authority. Unlimited law is almost as great of a disaster as unlimited men.
Now even if Congress thinks it can make any proclamation, no matter how absurd or obnoxious, law, it can still be advised, such as by an economist, that arbitrary laws have distinctly non-arbitrary consequences. A law is not a command but an incentive, and people tend to adapt and work around incentives sometimes in ways that stymie the intent of the law-makers. If Congress desires to secure the greatest good for the greatest number, then most of its laws fail to achieve this end and can be condemned on this ground alone.
But Rothbard objected that it is not an economist's job to predict the legislature's ends:
Let us for example assume... that the great majority of a society hate and revile redheads. Let us further assume that there are very few redheads in the society.
This large majority then decides that it would like very much to murder all redheads.
Here they are; the murder of redheads is high on the value-scales of the great majority of the public; there are few redheads so that there will be little loss in production on the market.
How can Mises rebut this proposed policy either as a praxeologist or as a utilitarian liberal? I submit that he cannot do so. (EoL, 213)
The only solution seems to be to point out that the murder of redheads is grossly immoral and cannot be legislated. I have supplied a proof of that earlier.
I'm not saying that judge-made codification of natural law is perfect, but that is only because judges can be extremely stupid and make mistakes, sometime gross ones, and moreover, the judicial branch, in order to do its job in any way decently, must be not only independent by entirely private, which it is not. But it's the only alternative.
Judges on my system are still part of the ruling class or government if you will, but they are not part of the state. In this sense, as law-discoverers whose judgments and precedents shape the legal system of a community, they "rule" or "govern" this community. But they are not on the payroll of the state, as employees of the executive branch are.
Public positive law is empirical, i.e., can be made when no a priori deduction of best law from considerations of human nature can be found, such as in a case where an externality can be resolved either way. But the state cannot even begin to calculate whether the benefits to the majority from genocide outweigh the costs of death to the minority of the murdered. It's not just that actual calculations will in fact come out against the mass murder; but that it is impermissible for a legislator or voter even to worry about such things.
Moreover, to agree that every public positive law (as opposed to private positive law, such as contracts, covenants, civil associations) is to be evaluated on its merits and thereby to enter the policy wonkish game is to concede defeat at the outset. Since taxation (perhaps for any purpose other than paying the actual employees of the executive branch on the local level) is theft, Congress has no lawful authority to lay taxes in the first place. It has no authority to outlaw alcohol, tobacco, drugs, or whatever. It has no authority to issue economic regulations. In short, it cannot in passing positive law contradict natural law.
Consider the implications of the opposite conclusion. If Congress has the right to tax, then it also has the right to determine how much to tax, and so it becomes its sole prerogative indeed to determine how much of a citizen's income to grab and how much to leave to the citizen. If Congress has the right to regulate, then it also has the corollary right to determine the exact balance between "pollution" and production, and how much to discourage the latter in order to diminish the former all the way to fully shutting down production and destroying civilization. Liberty in the modern sense, as liberty of an individual to be free from government interference, disappears and is replaced (if it is) with liberty in the ancient sense of equal share of every citizen in participation in communal government. But the latter "democratic" liberty is deeply inadequate.
It is inadequate precisely because it is not grounded in natural law rightly understood.