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Moderating a community is more like gardening than it is like engineering. It’s an art of balance and having a light touch rather than having an iron will and designs for the future. Formal moderation is important for some communities and entirely unneeded for others. When a community decides to have moderators, it should begin by having community standards.
What the law says and what a community says can and will differ when it comes to moderating content and setting acceptability. I believe the law must respect a fundamental right to free speech and any limit on free speech is extremely difficult to justify. Outside of direct actionable calls to violence, people have a legal right to speak as they please1. Of course, having a legal right to speak doesn’t mean a right to speak in a particular venue or community. Communities often times have more strict standards. If your community is geared towards young children discussing a game, then obviously the allowable content is more strict than a community of adults discussing their dating lives.