Most libertarians are not utopians. So no one claims everyone would be happy. Especially since all have different notions of happy.
Human egotistic emotions makes government fall apart even more. The notion that big government somehow keepa this i check is ridiculous and against everything you see in history.
The market is the best way to channel these emotions to productive gains. Because you need to i order to profit. If you can just tax well no need to be efficient
IMO- irrespective of big or small , a government which works for people is the need of hour.
Markets don't exist in isolation either , they are heavily influenced by externalities , its only free within certain bounds , don't you think ?
government which works for people - this is mostly empty words. what does work for people mean?
while market can have externalities and bounds there are ways around this in a mostly market economy. Now libertarians are of varying oppinion on this. Mostly will tell you about Coase. I can accept some laws for externalities that can be significantly damaging, as long as this is clearly proven. Although I am more on the punishment for damage when damages caused to others are evident than excesive so called preventive regulation for most things.