A political philosophy that values personal freedom and limited government.
A great deal of confusion, both among critics of libertarianism and among libertarians themselves, comes of failing to distinguish between two schools of libertarian thought:
Natural rights libertarians
Or "moral libertarians," believe in personal freedom as an end in itself. They argue that individuals should be free to govern their own lives, to do anything they want that does not impinge on the freedom of others. Natural rights libertarians typically hold that the use of force (except in self-defense) or coercion by threat of force is always immoral.
An extreme natural rights libertarian would therefore argue that taxation is wrong because because it involves a government taking its citizens' property, by threat of force, against their will. And barriers to trade are similarly immoral because they limit individuals' freedom to exchange their property with other willing individuals.
Locke and Jefferson were early and influential natural rights libertarians; Ayn Rand is a well-known 20th century example.
Or "consequentialist libertarians," believe that people can handle their own affairs, individually and through private cooperation with others, better than the government can do it for them. Pragmatic libertarians believe not that the exercise of government power is immoral but that it often does not work- or does not work as well as the unrestrained operation of free markets. They take an ultimately utilitarian moral position, more concerned with human happiness than with natural rights.
Pragmatic libertarians would argue that high tax rates are undesirable because they take away people's incentive to be productive, and that trade barriers hurt the countries that impose them by raising the price of goods.
Consequentialist libertarianism descends from Adam Smith as natural rights libertarianism does from John Locke. Milton Friedman is the leading 20th century American exponent of this school.
Many people who consider themselves libertarians fall into both camps, of course. And the Libertarian Party regularly argues from both positions in its literature. The natural rights position and the pragmatist position lead to generally similar political consequences, but many libertarians seem unwilling to acknowledge the distinction between the two points of view, or to choose between them when the two philosophies come into conflict.
A libertarian will argue, for instance, that minimum wage laws are undesirable both because they abridge the right of individuals to enter freely into contracts with each other and because they create unemployment. The first is an absolute moral argument, the second is an empirical argument, contingent on particular economic circumstances. Libertarians (and the Libertarian Party) ought to determine what their position would be if it turned out that minimum wage laws do more good by raising wages than they do harm by putting the least-skilled workers out of work.
In the United States there is arguably a third category of Constitutionalist libertarians who believe that the federal government should limit its actions strictly to the powers enumerated in the U.S. Constitution. This point of view is allied with the judicial philosophy of strict construction. In theory a Constitutionalist could support a larger, more active government, but feel that the Constitution should first be amended to make additional government power legally legitimate; in practice most Constitutionalists also support a small, limited government on either natural rights or pragmatic grounds.