Daniel Dennett argues convincingly that determinism and free will are not incompatible.
The crux of his contention is that from a complete set of deterministic rules one may engender contingent outcomes, that is: situations that call for the exercise of judgement and choice.
While restricted by a complete set of initial conditions and fully deterministic rules for action, the results of such determination may proliferate to form an evolutionary order, which, in turn, brings about the capacity to learn, compare, weigh and decide among options.
Personally, I feel that some sort of constraint on free will ought to be expected, and that free will as a precondition of moral responsibility and intelligent choice is satisfied under the conditions that Dennett explains. The free person is not entirely undetermined in his choosing, yet the degree of freedom accorded her is large enough to make her a responsible agent to be held accountable for moral or other purposes (like checking learning progress or the quality of an argument and so on).
This is an insight of multiple import for the place of liberty in our lives. When deterministic conditions can evolve to develop substantial margins for deliberate human strategies, we may, in principle, reach a stage in this development that calls for freedom as we understand it: a high degree of personal autonomy. In the end, the demand for liberty amounts to a choice in favour of
- (i) a deterministic system, an evolved order with wide space for delegated, locally and personally competent decision-making, that is better than
- (ii) human despotism, an ad-hoc-regime of paternalistic second guessing resulting in severely sub-optimal information-processing and insufficient environmental adaptation.
Relatedly, and I think Dennett mentions this aspect in his lecture, without deterministic constraints it is hard to imagine an orderly universe, i.e. one in which we can expect to make reliable choices thanks to a reasonably predictable habitat.
Totally random ad-hoc-determination (of conditions in an environment) would produce chaos in which successful adaptation is not possible.
Below a brief summary of his arguments (apologies for the bad sound quality), as well as a full lecture by Dennett on the compatibility of determinism and free will.