The Monarda Law says:"Never say NO!" or how I used it even bfore knowing Nobilis, "Give the players what the want, but not how they want it." (in the book it is somewhere around pp. 17-20).
Basically, it the great idea that in the end doing things in the fictional world does not come down to either making it or not, but implementing how the character did it. The advantage of pen&paper or PbP roleplaying over MMORPG is that your choices are not restricted by an programmed engine, only by imagination. A game engine says "No this is not possible" all the time, a DM/HG can say "you can do it, if..." or "you can do it, but this will happen, too. Still want to do it?" and so on.
Also players like to try out all kinds of stunts that cannot be covered in full. Players are more satisfied if you as GM/HG say:"you can try, but is highly unlikely because of ..." rather than "you can't do it, because it's not in the rules."
THat is why it is so important and why it is coverd in the very first part of Ianthe's treatment about HGing.
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What I am working upon is what makes fictional world work, techiques empolyed to created them & versimiltude, concepts like immersion, interaction and so on. I am working in German, so it might be not too easily transferable. Easier is giving you some references to english laguage literature we use.