Naturally socialists Nobody Fugazi and Vint Falken see nothing but evil in the idea of Linden Lab running the United States of America or The World.
I wish I could find the article now by the guy who compared the U.S. Constitution to the TOS of Second Life and found it terribly wanting, of course. Anybody? I can't seem to find the link -- but it was sobering.
Obviously, on the down side, the removal from the service for "any reason or no reason" and the ability to confiscate all your property means that the state could kill you and seize all your property arbitrarily -- as the anonymous poster comments on Nobody's blog -- and of course, no reasonable state does this, and only the most totalitarian states routinely engage in this, and not forever, as people rebel.
But let's push it further...
1. When the state kills you and seizes your property, you can come back on an alt and use an anonymizer. In fact, it's wise for citizens to keep a number of "mule" alts with property and money at the ready for just this occasion when the state exercises its arbitrary and oppressive rule : )
2. There are no taxes, only rent -- or you can live free, camp, squat, fly around. Rent is fairly low, given that you get shelter, a place to have sex, a place to work and socialize all for about $25 or $50.
3. You can talk to 1,000 people at once in a group, and not have to ever pay a telephone bill.
4. The president, vice president, and many secretaries and deputy secretaries of state have office hours once a week, and you can always IM them.
5. You can pretty well instantly liquidate all your property to land bots or yard sales, and many rentals are refundable in case you run out of cash.
6. You never die, and you can set it up so that when you do die in real life, your spouse or children get your avatar and all his property, and your store can remain open and your creations can keep selling indefinitely. The state collects no death tax and does not insist on any burial procedures.
7. There would never be any elections, which has its down side, but you'd also be spared the expense and tedium of watching two candidates insult each other and tell lies for years. If you didn't like the government on your sim, make a new group with yourself as owner and move to a new sim.
8. You can easily be banned from the state blog and forums (media) but you can start a third-party blog that they can't touch, and also hold innumerable live debates inworld pretty much without interference.
9. The state builds roads and parks for free, without taxation. To be sure, this means you have to put up with juice bars and bowling alleys called "Hot Balls", but you can always fly to another sim.
10. The state lets you keep a limitless amount of inventory without charge, and you can store it without having to take up space inworld.