Limited government is a type of government with limitations on what it can and can’t do. Explore the concept of a limited government, study the underlying principles, and learn about the instances of limited government today. Updated: 09/23/2021

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The term “limited government” can be confusing. For instance, when you hear the words “limited and, ” you may believe it means that the government has been restricted completely in what it can do. However, the definition of ‘limited’ is slightly more precise. A limit administration is a form of government that has the principal government officials have very limited power over the legislation and the decisions made without the approval of other departments or government leaders.


Democracies are the basis of a limited government. In this form of government, the power is divided or delegated so that a particular person or group of them does not hold excessive influence or power. In essence, this kind of government was created to grant citizens of the country individual rights and the protection of private property.

The ultimate goal is not power—the purpose of a limited government. The limited government structure is intended to maintain peace among everyone involved within the government. In a limited system, those who write the laws must follow the laws. The citizens can choose who a legislator is. They can do this by electing representatives and officials. The constitution generally holds this form of system of governance accountable.

Examples of Limited Government

Any country with an elected governmental system that is democratic is an example that has restricted its government. A lot of countries around the globe have a government that is limited, and some examples include:

  • United States
  • England
  • Canada
  • Denmark
  • Germany
  • Mexico
  • Australia
  • Japan

Problems With Limited Governments

Although many of the most prominent political thinkers today believe that the power of government should be restricted, however, there is some divergence on the precise limits that the power of government should be able to be given. Many critics believe that the government should have the power or the obligation to resolve problems of collective action that can’t be solved through market forces by themselves.

One common example is environmental laws that penalize businesses who pollute the air or drinking water. While it is possible for individuals to sue pollution-related industries in the courts, this is not difficult for many potential victims, particularly those not part of court systems. Instead The Environmental Protection Agency is expected to punish the industries in the name of the general public.

Another concern is protecting crucial industries. Many governments use subsidies or tariffs to encourage domestic manufacturing or agriculture while prices are lower in the international market.

While protectionist policies can be used for the benefit of certain groups of interest, it also supports industries with a strategic or security significance. Based on this logic, it is believed that the cost of protecting these industries is less than the expense of not having these industries, particularly in the event of a crisis of major magnitudes like food or war.

Limited Government vs. Small Government

There is the possibility that the government that is too tiny. In everyday use, the term “limited government” is often employed in conjunction with “small government,”–the notion that governments should have as low taxes as possible and a small number of administrators. While these concepts are related, a smaller government may not always be able to safeguard the public interest.

Take, for example, the hypothetical scenario of a country where taxes aren’t high enough to provide administrators with an appropriate salary. In order to earn an income, administrators may use bribery or graft, which could result in a more burden on the economy than taxation.

Research conducted by the World Bank confirms that public-sector wages play a significant role in anti-corruption efforts. Based on the data of each country and research, the Bank found that raising wages can reduce corruption in certain circumstances when combined with appropriate policy. 5

The term “limited government” appears to originate in the time of James VI & I, the King of Scotland, England, and Ireland.

Examples of Limited Governments

Since 1996 in the year 1996, since 1996, the Fraser Institute – Canadian research and educational institution, has been producing annual reports that rank countries by the extent to which their institutions and policies favor economic freedom. The Fraser Institute measures limited government by the amount of government (top marginal taxes, public expenditure) as well as laws (protection in respect of rights to property as well as the independence of the judiciary) as well as solid money (inflation) as well as the freedom of trade with other countries (tariffs and trade barriers) and regulation of the credit market in the labor market, as well as business.

The rankings below are from the Fraser Institute’s 2021 Economic Freedom of the World Index (“Fraser Index”) which analyzes the economies of 165 nations, including regions. 7

Hong Kong

Technically an autonomous region within China, Hong Kong was ranked first on the 2021 Fraser Index, largely because of its relatively low barriers to foreign investment and trade. 8 Hong Kong also has low tax rates and fairly slack protections for labor.

It is important to note this: Fraser Institute’s Fraser Index places significantly more importance on freedom of the economy as opposed to political freedom. The year 2019 was the one on which the data for 2021 were based upon-Hong Kong was also the scene of violent crackdowns, such as arbitrarily deportations and arrests. 9 Nonetheless, according to the Fraser Institute ranked, Hong Kong first in freedom of economic activity.


Even though Honduras was ranked 70th on the scale of economic freedom, however, Honduras was ranked 70th in terms of economic freedom. Fraser Index ranked Honduras second in terms of the size of its government, just ahead of the neighboring Guatemala. Honduras received a top score on its monetary policy and very few interventions in its economy, while balancing the low scores of the legal framework. 10

New Zealand

According to Fraser ranking, New Zealand was the third-most free economy worldwide, but it was ranked 92th in terms of the size of the government. It was praised for its trade freedom as well as business-friendly regulations and its legal system of government. But, it was a little smaller in terms of government, which is mainly because of government spending and subsidy. 11

How Is Federalism Connected to the Idea of Limited Government?

Federalism is a term used to describe a political system of delegating certain powers to local or provincial authorities. In a system of federalism, local governments could be able to establish their own legislature and courts, tax authority as well as other functions of the government. In certain instances they might also be granted the ability to separate of the federal government.

How Does the Constitution Reflect the Principle of Limited Government?

Within the United States, the constitution divides the federal government into three different branches with different powers and limitations. The three branches must cooperate to implement new laws and policies. When the constitution was created, it was believed to be unlikely for any single person or group would be able to have control over the three branches. This separation was viewed as a means to prevent government overreach.

Who Came Up With the Idea of Limited Government?

The concept of a limited government is rooted in the time of the Magna Carta, the idea was further developed by the Enlightenment thinkers during the 17th and eighteenth century. The notion that power in government is dependent on the consent of the people governed comes from John Locke.The idea of breaking up the state into three parts is believed to be the work of Baron de Montesquieu as well as the idea to ensure that government officials refrain from interfering in commerce is often believed to be the work of Adam Smith. A lot of aspects of the ideas were incorporated in both the American or French revolutions.


The notion of limited government states that there must be legal limitations on the power of the political authorities, specifically with regard to the rights of individuals. The concept is equally important when it comes to economic matters, since government intervention could result in disruption of trade and markets.