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This has been a difficult time for those of us who extol the merits of a free market system. The current housing crisis and the strain it is putting on our banking system has nearly caused the financial system to collapse. Unfortunately, those who advocate for a larger role for government in our daily lives will be able to point to the crisis of 2008 as "exhibit A" for why we should not be left alone to pursue our own best interests.

However, this criticism misses a critical assumption that we make when advocating a free-market economy: It requires a virtuous people who are willing to assume personal responsibility for their actions. Without right behavior, liberty quickly descends into license.

For some time now, even a casual observer would have to be concerned about increasingly broad-based imprudent or indeed immoral behavior in the economic life of our society. While the increased incidence of this poor behavior has been disappointing, those of us who are troubled by it have taken solace in the fact that the free-market is pretty efficient at recognizing mistakes in judgment or dishonest behavior. If you cheat your customers, employees, or shareholders, you will eventually go out of business and likely to jail. If you take imprudent risks in the market, you will eventually lose money.

This current crisis is different. Instead of a situation where individuals exercising poor judgment are corrected on a case-by-case basis, this crisis has evolved into a situation where poor judgment by a sizable minority is at risk of shutting down the financial system. And as you might expect with a crisis of this magnitude, there is plenty of blame to go around.

Wall Street is the obvious and almost-too-easy place to start. The managers of these institutions, the stewards of our financial system, have a profound responsibility to maintain the public's trust and confidence. Collectively, they have not done so. For years it has been obvious to all, except perhaps those reaping the gains, that executive compensation in many cases has been outrageous and perhaps nowhere more so than on Wall Street. Bloomberg news reports that Wall Street's five biggest firms paid more than $3 billion in the last five years to their top executives. Apparently these executives allowed their firms to take excessive risks in order to generate these gains because today two of the five are out of business and the other three no longer exist as stand alone investment firms.

Lenders have also shown signs of poor judgment. Lending provides a vital and necessary function in our economy. However, some lenders have lost sight of the fact that they have a responsibility – to those who provide the capital they loan, if to no one else – to verify that borrowers can support the debt they take on. The record level of defaults indicates that this responsibility has been shirked.

Consumers are portrayed as victims in all of this. This is a mistake, absolving them of personal responsibility. A free system of exchange will reflect whatever values we bring to it. Today, the values we bring to the market are often too materialistic. A sufficiently large minority of consumers, desiring to have more material goods than they could afford, borrowed enough money to help bring down the system.

Need a bigger house or a vacation home? No problem, just take out a floating rate negatively amortizing loan. By the way, we'll let you self-verify your employment history. Need a new car? Just sign up for these extended lease payments. Want a big screen flat panel TV? Just sign up for another credit card.

None of these purchases are bad in themselves, but if we push ourselves into financial ruin to obtain them, there is something disordered in our desires. There is only one thing that will fill our desires and, to borrow from Augustine, our hearts will be restless until they rest in Him. This society seems to increasingly lose focus on that truth.

The collapse in the real estate market triggered this crisis, but it was the behavior of market participants that laid the groundwork. As people working to advance the cause of freedom, we have to continue our efforts to explain the merits of a free economy. But we also have to think more creatively and work a little harder to emphasize the importance of virtuous behavior.

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