Kids need limits; what we all have learned by watching kids is confirmed by research findings in neurology.
Children are faced with the necessity to rein in their impulse toward something they want so they can have something they want more. This is how they learn self-control. Our limits actually teach kids to set limits for themselves, which is otherwise known as self-discipline. Some permisive parents hate to set limits, probably because they have to cop with frustrated children, who will possibly initiate a tantrum. Over time, though, they often see that their children do not develop the ability to tolerate frustration or to manage themselves. These children are often referred to by others as “spoiled".
Other parents boast that they have no problem in setting limits, and are proud of their child’s quick obedience to their directives. Their children often do well until high school, when it becomes apparent that they haven't developed good judgment or the ability to think for themselves. Kids who have been raised in an authoritarian manner are more likely to go along with their peers, to become bullies or victims, to have difficulty managing their anger, and to become adults who are more prone to depression.
There is a middle ground that works. Research shows that children develop optimally when we set limits as necessary, but do so with empathy. Empathy makes your limit more palatable to your child, so she doesn't resist it as much. That's what allows her to internalize it. Kids need appropriate limits, but it's how you do it that counts. Don’t go out of your way to create unnecessary limits, but don’t hesitate to set necessary ones. Just make sure that you have a terrific connection with your child so that you can offer genuine empathy, and he can feel it, while the limit setting is taking place.
More information: http://www.ahaparenting.com/parenting-tools/positive-discipline/effective-limits