I have found that trying to maintain an exact balance was just impossible. As you said, it ends up being ridiculous: if I help an old person to cross the road, do I have to steal her bag right after that?

So after a long time trying to play this kind of character, I realized that the important part was not to maintain an hypothetical balance (which might not even exist in the first place), but to avoid extremes.

For example:

• You don't want the evil demons to eradicate the Good Guys. But you don't want either the Good Guys to eradicate the evil demons.

• Total war is bad. World peace too.

• Civilization leading to Nature's extermination is bad. But Nature overwhelmingly destroying civilization is bad too.

It ends up being more fun to play, as you don't have to worry about any single action, only the grand scheme of things.

And I believe it is closer to the intended concept, as by making sure that both sides of the coin always exist, you are really working towards Balance.

(it will also makes you develop a "Neutral Mind", which is always a good thing)

I'm working on the assumption that D&D alignment is an objective mechanic: in a world where alignments can grant magical power and create planes of existence, and a spell can tell the difference between a man who saves babies for Pelor and a man who eats babies for Pelor, alignment must be objective and intent counts for very little.

This is a social issue, not a mechanical one.

Mandating changes to a player's character is a Big Deal and can destroy the trust in a group if handled poorly. If he thinks his actions don't merit punishment, he will go on the defensive and there will be Bad Feelings in the group regardless of the mechanical outcome. Before you lay down a ruling like this that will so seriously impact his character, understanding must be reached. To this end:

First decide if it's worth it.

I've had at least one chaotic monk who I just let alone because of the group's social dynamics: the player was younger by several years at an age when that was significant; his actions were rarely negative for the party; and he actually made the group laugh.

Alignment, especially as a class requirement, isn't a balance issue. Although alignment is almost impossible to excise from the system, exactly which alignment a character has is largely irrelevant to mechanical balance. So if everyone's safe and happy, maybe just let it drop because the problem is entirely cerebral and not actually impacting the game as it's played. Assuming that's not the case...

Work with him to create a common baseline.

Many alignment debates spring from both parties feeling the definitions are obvious when in fact everyone has a different idea of what the alignments mean and look like.

Before you bring in the alignment hammer, sit down with him outside the regular session. A lawful character is probably acting in accordance with a code of some sort, so ask him to help you understand his actions by writing down his code. Come prepared to study the D&D alignment concepts together (not to lecture him on them). Work with him to make the code fit the D&D definition of lawful while still being as close as possible to his vision of the character.

This gives you both a clear idea of what is and is not lawful for that character; now your discussions can have a reference point you both agree on. You might even find that he has some vision or insight you didn't understand before.

Make it a story.

Now that you have common ground outside the game, give his PC a chance to make the change organically from within: whether he adjusts his behavior to match his code, or changes his alignment, if you make it a cool story instead of a decree from on high there'll be more buy-in from the player.

• He defies the outdated passiveness of his order and strikes off to be a vigilante hero; the Doctor in Doctor Who is a grand example of this concept.
• His respected mentor needs the party's help and while they work together the monk is reminded of the importance of an ordered life.
• He falls in love with a chaotic neutral druid and renounces his old life.
• He's been influenced by some subtle mind magic and must throw it off before it destroys him.
• An injustice that he feels personally about cannot be addressed through lawful channels; he still follows a personal code but disregards the societal structures that have failed him.

You get the idea: help him do something cool whatever the mechanical result is.

You're not the boss

Again, this is a social issue. The Game Master is rarely the leader of the social group and he's certainly not the High Judge of Fun. Remember this whatever you do, and remember that everybody needs to be safe and happy first. Only then can we worry about following the rules.