> If a government is small does it have enough power to impose the rule of law and be an economic and social moderator ?

That's a very binary take. Nobody argues for "smaller in all dimensions", just smaller in specific dimensions.

Depends on how small it is. What I can argue for is that there are probably parts of the government that could be removed. Bureaucracy in Western countries has only increased over the last 60 years, for example. Rules are almost never removed.