"If you then, who are evil, know how to give good gifts to your children, how much more will your Father who is in heaven give good things to those who ask him!" (Matthew 7:11 ESV)
These words of Jesus recall some of the tension we feel when we speak of human dignity and human depravity. In one sentence Jesus says of his disciples, "you...who are evil" (depravity) and "you...know how to give good gifts" (dignity). Both bad and good, in some sense at the same time!
One way to put together this view of human dignity and depravity is to think of a beautiful castle ruin. [Above: Urkuhart Castle, Inverness, Scotland.] There is enough of the original structure left, so that the beauty of its design and majesty can be seen and appreciated. But it would be impossible to actually live in it. In other words it is not restored into a true dwelling place, or "up to code" for a holy God, so to speak. God's dwelling with man is the final goal of creation:
"Behold, the dwelling place of God is with man. He will dwell with them, and they will be his people, and God himself will be with them as their God." (Rev. 21:3; compare with Ex. 33:3-5)
Sometimes we use the phrase "total depravity" to describe our fallen nature, but perhaps a better phrase might be "radical sinfulness," as suggested by author R. C. Sproul. Namely, our sinfulness is not a superficial or isolated thing, but goes deep into the the human heart and there is nothing -- not motives, intentions, loves, thoughts, actions -- that is not affected by this. In other words there is no pristine core, or even neutrality, to the human heart, which is good in God's sight. The badness extends to all of our lives, though not necessarily badness in the worst degree. We are spiritually unresponsive, "dead in trespasses and sin" (Eph. 2:1), and need the quickening touch of God if we are ever to live.
Here are some options as to how that might be understood...
The first heart is the devil-on-one-side-angel-on-the-other option, where the human heart is viewed as a neutral ground with two forces at work. We get to choose whether we will be good or bad. For most people, the bad angel wins, especially if it involves chocolate or sex. The second heart is the good-person-making-bad-choices option, where at heart (the heart of the heart) there's goodness, but over that is the layer of "making mistakes" and "bad choices". Goodness is essential, badness is accidental. The third heart, I believe, best represents the biblical truth of radical sinfulness. The heart is not neutral and free, but is thoroughly tainted with evil, to lesser or greater degree. In other words, there is not a pure, good core (or portion) of the heart. It is God's grace and mercy that keeps us from being as bad as we could be, and it is his grace that shows us much good.
There is much that is beautiful in creation, including the human race, that we can see is good at least in a relative sense. We might call them human goods, but not "saving" goods. Science, art, music, architecture, education, technology, homes, work, hospitals, and all kinds of human kindness -- for all these things we should give thanks! These things do not exist, however, because there is an essential goodness within us that merits God's favor. It is because God is good, and gracious in his care and providence, whether to promote human good or to restrain human wickedness, that these things exist. It is due to God's mercy and kindness that we experience so much good and beauty in his creation.
However, there are times when humans descend to a depravity that is total, not just in extent, but also in degree. Think of the Flood, Sodom and Gomorrah, the Holocaust, the Cambodian killing fields, the Rwandan genocide, 9/11, or April 16. These events cannot be explained merely in terms of good people making bad choices, or even mental illness, but rather, they seem to be the eruption of something evil that is in the human heart, pent up and repressed, but at last fully manifested.
The whole point of addressing the sin issue is not just to make people feel bad. It is to drive them to Christ for forgiveness, for a new heart, for grace. C. S. Lewis helpfully sums this up: “The road to the promised land runs past Sinai. The moral law may exist to be transcended: but there is no transcending it for those who have not first admitted its claims upon them, and then tried with all their strength to meet that claim, and fairly and squarely faced the fact of their failure.” (From The Problem of Pain)