This is an interesting question, especially in relation to The Crucible, because in that play, we see that a theocracy might have some pretty fatal flaws. Along those lines, I'll briefly mention some possible negatives when a theocracy has too much power and control. In the play, we see that the leaders of their theocracy were also religious leaders who supposedly had God working on their side. Those leaders--Reverend Parris, Judges Danforth and Hawthorne--had too much power, because they could condemn people to die with no evidence and with no fair trial. They had that right because they supposedly had God's will on their side. Also seen in the play is how people were so fixated on the religious side of events that anyone who thought differently from them at all, in any way, were thought of as heretics, and hence punished by the law. Take Sarah Good for example, who wasn't married and didn't quite follow their religious customs. As a result, she was condemned and judged, and eventually arrested for witchcraft. Theocracies have very rigid rules, and strict punishments, and if taken too far, then serious damage can be done. People are afraid to speak up, because then they'll be seen as evil, and the law isn't on their side if they are. That is what happened in this play, and what led to so many arrests.
On the other hand, if individual freedom is left unchecked, it often results in anarchy, or total chaos and destruction. There are no laws and no order to keep balance. People do what they want, when they want, even if it is as the cost of someone else's safety, well-being or happiness. Society needs to have some checks and safeguards, some reassurances that their property and happiness won't be taken from them by someone else. That is what the law is supposed to protect. In The Crucible, the law had overstepped its bounds and were the guilty party in taking property and happiness; they weren't protecting any longer, they were taking, just like people in an anarchy do.
The end result of either one of these extremes is a loss of freedom, total fear, and no one's rights being protected. I hope that those thoughts helped; good luck!