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The historical argument between the followers of Paul and James can be resolved by understanding that the two biblical writers were approaching the topic from opposite ends.
Paul found it necessary to distinguish between faith and law-works in order to separate justification from sanctification. James found it necessary to link faith to law-works in order that we might discern the difference between genuine faith and its counterfeit.
Both were right, and there is no reason to see any contradiction between the two viewpoints. To see a contradiction is to lack understanding.
It is also helpful to know the meaning of the word “justified.” To both Paul and James, justification was a legal term to indicate the favorable ruling of the court in any dispute between two parties. When two parties presented their dispute, the judge was to hear all the evidence and to apply the law in a just manner, justifying the one and sentencing the other.
The man who is justified receives grace (i.e., favor) from the court. In the theological sense, all have sinned and stand before the divine court with the devil (“accuser”) acting as Chief Prosecutor. True believers in Christ have the Holy Spirit as their advocate, or lawyer, which is the meaning of the term parakeltos, or “Comforter, one who gives aid as in a court of law.”
Believers are advised by their Lawyer to claim that Jesus Christ already paid the penalty for their sin. A believer is one who has placed his faith in the effectiveness of Christ's death on the cross. The Comforter does not advise believers to deny sin, but to agree with the law, knowing that the full penalty was paid at the cross. The demand of the law was satisfied. Hence, the case against us is dismissed, and we receive a favorable ruling from the Judge.
Paul understood that we were not to set forth our own good works as part of our defense. It is not a proper defense to try to build up a portfolio of good works to try to outweigh the sins that we have done. The law is not interested in our good works. Its only reason for prosecution is the sin that we have done. A murderer, for instance, cannot say in his defense, “I saved a man from drowning once.” The law will remain focused on the man that he actually murdered.
James, on the other hand, limited his discussion to the evidence of faith that determined who was a true believer. In other words, prior to the court scenario presented above, how can we tell who have actually retained the Comforter as their lawyer? Who are actually being led by the Spirit? Many make the claim, so James distinguishes between claims that are genuine and those that are false.
Those who are genuine believers, he says, are those whose lives are changed by their faith, those whose works reflect that inner faith. In other words, they are law-abiding and obedient to the will and voice of God. Those who claim faith but exhibit lawless behavior are not genuine believers, but are warned by Jesus Himself in Matt. 7:21-23,
21 Not everyone who says to Me, “Lord, Lord,” will enter the kingdom of heaven; but he who does the will of My Father who is in heaven. 22 Many will say to Me on that day, “Lord, Lord, did we not prophesy in your name, and in Your name cast out demons, and in Your name perform many miracles?” 23 And then I will declare to them, “I never knew you; depart from Me, you who practice lawlessness” (anomia).
Prophecy, exorcism, and miracles are all good, but they are not the final evidence of genuine faith. Men are impressed by miracles, but Jesus was not. He understood that lawless men could perform miracles.
James understood this as well. Hence, in our court scenario, where a believer must answer the charges against him, a lawful believer follows the guidance of the Comforter, not denying sin, but presenting the Lamb of God as the Sacrifice that has paid the full penalty for his sin. A lawless “believer,” on the other hand, may present all the good works that he has done—prophecy, exorcism, and miracles.
These, however, do not impress the Judge, because he is not being judged for those good works, but for his evil works, his lawless behavior.
There is also a third type of believer, which complicates the matter, and which only God Himself will be able to discern fully. It involves believers who despise the law and yet their behavior is more or less law-abiding. I have met many who cast aside the law because they do not believe that it reflects the nature of a God of Love. They are misinformed, to be sure, but yet they follow most of the laws. They do not murder their neighbors, steal from them, commit adultery, or engage in the worship of graven images.
The problem here is that they follow the laws that they understand, but disagree with those laws that they misunderstand. Hence, their lawless behavior is limited to a few areas of their lives. Usury is one of the more important cases of lawless behavior among Christians. They misinterpret Luke 19:23 to say that Jesus overturned the law against usury. Hence, they do not think that charging interest to a brother shows any lack of love. Business is business.
Others think that God's laws against partiality do not apply to Jews or Israelites. They think that when God chooses or elects someone or some nation that He is showing partiality. Because they believe God shows partiality, then they feel justified in doing the same. Hence, Christians are left with a double standard. Jews are allowed to steal land from Palestinians and to murder any child who throws stones at them, but “gentiles” are not given such a privilege, except in defense of a Jew.
Worse yet, some Christians believe that Jews are saved by race, even apart from faith in Christ. Some say that Jews are saved by following the law, while “gentiles” are saved by grace through faith in Christ. Essentially, they believe in two gospels. These are examples of the law being applied with partiality, due to their misunderstanding (and ignorance) of the law.
The point is that there are many who claim to be Christian believers, but who come from a long tradition of lawlessness in the Church. Any misunderstanding will have negative consequences in some area of life. In such cases, Christians continue in sin without realizing it. Ignorance is, indeed, a partial excuse for leniency, but if men have deliberately refused to study the word that is available to them, they will be held liable to some extent.
Paul says that believers who have laid Christ as the foundation stone of their “temple” will have their faith tested by “the fiery law” (Deut. 33:2) of God. 1 Cor. 3:15 says,
15 If any man's work is burned up, he shall suffer loss; but he himself shall be saved, yet so as through fire.
Jesus Himself spoke of believers who would receive few or many stripes according to their knowledge of God's will (Luke 12:47-49). Verse 49 also calls this a “fire,” because it is based on the fiery law found in Deut. 25:1-3.
Paul says that these will not lose their salvation, and Jesus says that they will receive their reward “with the unbelievers” in the second resurrection. Hence, they will suffer loss on account of their lawlessness, but at the same time, it is recognized that their faith is genuine.
Is it not better, though, to show our faith by our works and do not consider the law to be in opposition to our faith? James 2:26 says,
26 For just as the body without the spirit is dead, so also faith without works is dead.
The apostle Paul is in full agreement.