Why does God punish us when He gives us free-will?

Great question.

A few things to explain first.

Actually, this may be a revelation to many but people was not held accountable for sin until the law entered which was only given to the Hebrew people. They were the ones under it.

For until the law sin was in the world: but sin is not imputed when there is no law. - Romans 5:13

However, when the law entered it came in with two sides to it. On the one hand, if the Hebrew's kept all the laws they would be greatly blessed. On the flip side, if they didn't then they were cursed.

You can see these blessings and curses in Deuteronomy 28. The Hewbrews had said to God before the law came - we will do all that you say.

Now with that in mind, the question still remains - what about the flood and Sodom and Gomorrah?

Suppose you were to get gangrene in your leg. The normal course of action to take is to remove the infected part to save the whole. It's like that, the people in the OT times could not be born again and delivered from demonic oppression. In Sodom and Gomorrah they were so corrupted and so demonized that there was no way to save them until Christ came. They couldn't have devils cast out of them because no one had the authority to do so. So you could say although these judgements looked harsh, they were in fact an act of mercy on the world as a whole. Had these people been left in the world, it would have been so corrupted that there wouldn't be a virgin left for a savour to be born through.

Similarly, the law had an imperfect but helpful effect of keeping one group of people partially (imperfictly) upright and focused on God. The law had this effect of being like a whip that helped keep them in order. So while the punishment looks extremely harsh, in actual fact if you look at it from this overall perspective that it was to help keep a people morally upright enough for a saviour to be born who would die for the sin of the entire world... it changes your perspective. Because the real nature of God is exactly like Jesus. Many think Jesus and the father are of a different nature, but actually Jesus said if you've seen me you've seen my father also. In another verse it says he is the visible representation of the invisible God.

Now that Jesus has paid the price for all sin, doesn't that just mean I can go and do what I want?

Yes and no. You have free will to do what you want. But, as pointed out by others, there are consequences. You will open yourself up to the devil. You will reap what you sew. e.g. if you have sex with a prostitute, you run the risk of catching a sexually transmitted disease. And causing all sorts of strife in your family. But, if you do fall into sin you have an advocate with the father.

My little children, these things write I unto you, that you sin not. And if any man sin, we have an advocate with the Father, Jesus Christ the righteous: And he is the propitiation for our sins: and not for ours only, but also for the sins of the whole world. - 1 John 2:1-2

No longer is the father judging you, and Jesus is not condemning you.

For the Father judges no man, but has committed all judgement unto the Son John 5:22

For God sent not his Son into the world to condemn the world; but that the world through him might be saved.

God gave us free will with the intention that we would use our free will to glorify Him in a variety of ways. What are we to do with it? Follow the greatest commandment: we are to love Him with all our heart, soul, mind, and strength. There are an unlimited amount of ways mankind can choose to do this because of the multiplicity of gifts and abilities and personalities involved. When you know what God's will is and do it, you have free will.

But if we choose to act against God and His established moral boundaries, then we are not acting with free will. We are, rather, in bondage to sin, and acting from the impulses of sin. Sin leads to negative consequences for the individual who sins and the person who experiences the brunt of the sin. On the human plane, we justly exact punishments upon the perpetrator who breaks society's laws, and hope the laws are a sufficient restraint upon society otherwise. When we are set free from the bondage in that area of sin, then we may exercise our free will to glorify God instead of the flesh, the world, or the devil.

I would not call it punishment but rather, the RESULT or OUTCOME of freewill.

Let's give an example.

You tell your little son not to touch the hot iron on the table. But, out of curiosity, the boy touched it anyway and the little hands burned. The child exercised his own freewill even if a strict warning was given by you. This is a result of freewill.

The same thing apply to Adam and Eve. They were strictly warned not to eat the fruit from the tree at middle of the garden.

Genesis 2:17 (NIV) "but you must not eat from the tree of the knowledge of good and evil, for when you eat from it you will certainly die.”

God did not say "I will punish you" but rather, the tragic result of it was given as a warning, "Death". Death is the result by eating the fruit from the tree of knowledge of good and evil. Eve knew very well what she was doing. Instead of listening to God, she listened to that serpent who was inferior to her. Adam also followed his wife and they both transgressed. The effect of the fruit immediately fell on them. All was cursed, the ground was cursed, man was cursed, sin and death entered the world!

Romans 5:12 (NIV) Therefore, just as sin entered the world through one man, and death through sin, and in this way death came to all people, because all sinned

But God in His mercy prepared a way out, the one and only way out, Jesus Christ. Jesus Christ died on the cross to pay the death penalty of sins, offered his blood for atonement of sins and became the one and only way to God. He is now the remedy from death.

John 14:6 (NIV) Jesus answered, “I am the way and the truth and the life. No one comes to the Father except through me".

Now, this is again another freewill exercise. IF you chose to receive Jesus Christ, you will get eternal life, ELSE, you prefer to reject Him, you remain in your sins and never receive the remedy from death.