Here is the full quote, from Wall's
Second State of the Onion Address
Of course, in Perl culture, almost nothing is prohibited. My feeling is that the rest of the world already has plenty of perfectly good prohibitions, so why invent more? That applies not just to programming, but also to interpersonal relationships, by the way. I have upon more than one occasion been requested to eject someone from the Perl community, generally for being offensive in some fashion or other. So far I have consistently refused. I believe this is the right policy. At least, it's worked so far, on a practical level. Either the offensive person has left eventually of their own accord, or they've settled down and learned to deal with others more constructively. It's odd. People understand instinctively that the best way for computer programs to communicate with each other is for each of the them to be strict in what they emit, and liberal in what they accept. The odd thing is that people themselves are not willing to be strict in how they speak, and liberal in how they listen. You'd think that would also be obvious. Instead, we're taught to express ourselves.
You may feel much better afterwards, but consider the poor guy next to you with the ruptured eardrum. Ruptured eardrums should be prohibited.
On the other hand, we try to encourage certain virtues in the Perl community. As the apostle Paul points out, nobody makes laws against love, joy, peace, patience, kindness, goodness, gentleness, meekness or self-control. So rather than concentrating on forbidding evil, let's concentrate on promoting good.
It seems to me that Larry is talking about how a then-popular viewpoint applied to interpersonal relationships within the Perl community, and that Joel took Larry's quote conveniently out-of-context. Perhaps he pulled the quote out of some random quote file.