So how do you deal with bad actors (and even criminals) in the market without government?

Friedman, in opposition to more extremists libertarians, proposed an smaller gov with just 4 departments: State, Justice, Defense & Treasury. The rest are just idealistic (aka. simplistic) radicals.

That I can get behind. The only remaining part is a framework of morality and fairness to make the above functional. You can still be oppressive even if one has a small gov for the following 4 departments. I would add a 5th department which is related to morality and public good, as none of those 4 can stop nonsense like giving children puberty blockers etc.

Smaller government does not necessarily mean less governance.

So what is meant by ‘small’? Is it just the ‘scope’ of what they can do?