To fully understand Nozick's theory of the minimalist state, we must first comprehend his views on economic justice. Nozick offers two systems of distributive justice for comparison: Entitlement theory, which is based on the history of acquisition and transfer of resources; versus end-state theory, which is based solely on the present distribution of resources. John Rawls' difference principle is of the latter type, forcing equal distributions of "social primary goods" and that transfers benefit the least well off when such a distribution is not present. If these conditions are not met, then the economic distribution is unjust, according to Rawls. Nozick's entitlement theory looks back to how the distribution of "social primary goods" came about. If the acquisition of property was just, (if the property in question was acquired in accordance with the Lockean proviso that previously unowned property becomes owned by anyone who "improves" it) and if all subsequent transfers of that property were just (i.e.. the property was not stolen, or otherwise coercively transferred) then the current distribution is just.

Nozick's belief in entitlement theory is a direct result of his belief in the absolute right of individuals to their own person, self-ownership, as it were. Therefore, wages a person earns from his labors are absolutely entitled to him. If the government taxes twenty-five percent of his wages, then, effectively, he works two hours per eight hour day without pay, which is akin to slavery. Nozick refers to the Kantian principle that individuals should be treated as ends in and of themselves, rather than means towards some other end. By taxing an individual's earnings, the government is, in effect, treating that individual as a means for some other goal, most likely the redistribution of wealth. This application of the Kantian ideal may seem suspect, as businesses treat employees as means towards profit and vice versa. But there are two key differences: First, the business / employee relationship is voluntary, whereas government taxation doesn't quite fit that category; and second, the business / employee relationship is one of mutual benefit, compared with a government that often compensates disproportionately for what it confiscates.

That is Nozick's justification for the absolute right to what is acquired (through original acquisition or earned transfer) but how does he define legitimate "unearned" transfer? Quite simply, if an individual justly acquires property, he has the absolute right to it, including any transfer to another, provided that such transfer is voluntary on both ends and does not violate the rights of any other individual.

There arises an acute difficulty for Nozick when property is acquired or transferred illegitimately, stolen perhaps, and then legitimately earned through labor. For example, if someone robs a bank and buys a car with that money, which in turn pays the auto worker, who then buys his groceries with that money, does the grocer not have a legitimate right to that money? Nozick does not explicitly say so, but it seems that they grocer is entitled to that money, but the bank robber is still responsible for compensation. But if the crime goes unpunished for a few generations, then what should happen to the bank robber's heirs? Here it becomes less clear. I would argue that any unspent inheritance should be given up in compensation, but after a few generations, the stolen money has been put back into circulation, and the economic situation will approach equilibrium again. There is no possible way to maintain absolute fairness, considering there will always be those who prefer to cheat and steal, so any system will be imperfect in dealing with this kind of situation.

Some believe that the conclusions that Nozick's theory lead to are totally unacceptable. They argue that Nozick's system would put the disabled at a disadvantage, since they have no right to compensation for their disability. These critics fail to recognize that charities provide for situations. The handicapped and the needy will not suffer any more than they do with government assistance, since charities are much more capable of providing for the disadvantaged. A key difference between charity and government aid is that the funds for charity come from voluntary transfers, whereas government funds come from coercive transfers.

Some also criticize the arguments upon which Nozick bases his theory. They complain that the poor and disadvantaged would have no reason to comply with a system which does not cater to their interests. But turn the situation around: why should the rich comply with a system in which everything they do must benefit someone else, as Rawls contends. That is a system in which success is punished and failure and poverty are rewarded. Nozick's system is designed to reward the successful and provide disincentives to failure and poverty. It seems to be much more sensible to make people want to be rich than poor.

Some also disagree with the Lockean Proviso as a justification for original acquisition of property. If I improve a piece of land that was previously unowned, then anyone who wishes to use the improvements that I have contributed owes me just compensation for my labor, according to the principle of self ownership. It does not require a large leap of imagination to then conclude that if I have the right to exact compensation for the use of that land, I then own the land. For those who deny this, the idea of property has little meaning, and therefore further argument is unproductive and futile.

Now that we have an understanding of Nozick's theory of economic justice, we can better understand his philosophy that the only just government is a minimal one. Government has three major forms of activity: Defense of its citizens from outside aggression, protection of the rights of its citizens from internal aggression, and economic redistribution. Nozick's system grants the government a virtual blank check in dealing with the first. In fact, he says, the defense of the people from outside aggression is the very means by which governments arise from a state of anarchy. He even allows for the coercive taxation necessary for this activity, saying that all citizens benefit and, therefore, are obligated to contribute. The second, protection of citizens' rights is not so open ended. The government must protect the absolute rights, such as freedom of speech, property rights, fair trial, etc. but is not given the freedom to define other rights, such as the "right" to education, housing, health care, etc. The third is completely off limits, for it is a violation of the right of the people to self ownership.

It is interesting to note that this philosophy is the basis of the United States Constitution, even though our government no longer operates in such a way. The Constitution prohibits the government from interfering in commerce, except that between states (pity the Supreme Court isn't clear on that concept), and prevents the confiscation of life, liberty, or property without due process of law.