The question of the title is a remark by Esther Dyson in an interview at Foo Camp. To understand the question: There's a lot of talk about new reputation based networks, socalled social software, that is supposed to help us establish the various layers of acquiantance in virtual space, that we are accustomed to in our own physical space. Everybody is saying that social software will provide a new coherence to the digital lifestyle - and tons of money for the new top brands in this new software category. Dyson's answer to the question is 'no'. The reasoning, which I think is correct, is that governments work from some basic fairness principle that assume the initial anonymity and innocense of the citizens. This is firmly embedded in (western) ideas of a fair society. Social networks in general and reputation networks in particular apply the direct opposite logic. Youi have to prove yourself to enter into the network.
In my opinion, Dyson's point is exactly why ideas of minimal government are bad ideas. You have to give people a fighting chance and that requires a certain openness of society. It's one thing to have a legal system that is based on these fairness principles, but freedom means very little if welfare and opportunities for a livelihood and education aren't available to citizens in general.
It is important to note though, that in practice governments often run lots of reputation networks, and civil society provide plenty of fair and open opportunities (e.g. free markets), which is why the politics of equality always has to remain a fight. No institution can provide fairness and equality by it's existence alone.