There are 3 segments of economic life: Private (Market), Voluntarism (Community), and Public (Government).
How It Works: Individual One offers a service or product. Individual Two offers a service or product different than Individual One. Individual One and Individual Two mutually agree to trade their products or services. The two individuals will not exchange their services or goods unless both believes they will be better off from the trade. This is also known as barter. "Money" can also be traded for a service or good when one individual does not have a good or service desired by the other. "Money" is just a store of value that adds flexibility to transactions when two individuals do not have goods or services that each other want. The concept of "Money" will be discussed later.
How It Works: An Individual provides services or goods to another individual or to the community in general without expectation of any goods, services, or money in return. This can also be in the form of volunteer labor as labor is also a service. This can also be in the form of money as money is a store of value that can later be exchanged by the one receiving it for goods or services. Voluntarism is obviously a voluntary transaction, totally up to the discretion of the individual.
How It Works: The state has policies that it wishes to implement. The state needs the labor or the fruits of the labor of individuals in order to obtain the resources to implement the policies. The state uses force to obtain the labor and fruits of the labor of individuals without their consent. The state can also take money from individuals which is just a store of value of an individual's labor or the fruits of that labor. Of the 3 types of activity in Economic Life, this is the only one that is not voluntary and the only one that does not require the consent of all parties to the transaction. Thus, libertarians believe that use of this type of economic transaction, the government, should be limited to only those circumstances where no other solution is possible where the problem to be solved is protecting the life and liberty of individuals.