This might be the clearest exposition on the question of faith and works that I’ve ever come across. It’s from J. I. Parker, “Concise Theology”.
“In the New Testament, faith (believing trust, or trustful belief, based on testimony received as from God) is crucially important, for it is the means or instrumental cause of salvation. It is by faith that Christians are justified before God (Rom. 3:26; 4:1-5; Gal. 2:16), live their lives (literally “walk,” 2 Cor. 5:7), and sustain their hope (Heb. 10:35–12:3).
Faith cannot be defined in subjective terms, as a confident and optimistic mind-set, or in passive terms, as acquiescent orthodoxy or confidence in God without commitment to God. Faith is an object-oriented response, shaped by that which is trusted, namely God himself, God’s promises, and Jesus Christ, all as set forth in the Scriptures. And faith is a whole-souled response, involving mind, heart, will, and affections. Older Reformed theology analyzed faith as notitia (“knowledge,” i.e., acquaintance with the content of the gospel), plus assensus (“agreement,” i.e., recognition that the gospel is true), plus fiducia (“trust and reliance,” i.e., personal dependence on the grace of Father, Son, and Spirit for salvation, with thankful cessation of all attempts to save oneself by establishing one’s own righteousness: Rom. 4:5; 10:3). Without fiducia there is no faith, but without notitia and assensus there can be no fiducia (Rom. 10:14).
God’s gift of faith is a fruit of applicatory illumination by the Holy Spirit, and it ordinarily has in it some measure of conscious assurance through the witnessing of the Spirit (Rom. 8:15-17). Calvin defined faith as “a firm and sure knowledge of the divine favor towards us, founded on the truth of a free promise in Christ, and revealed to our minds and sealed on our hearts by the Holy Spirit.”
Justification by works (things we have done) is the heresy of legalism. Justification, as Luther insisted, is by faith only (“faith apart from observing the law,” Rom. 3:28), because it is in Christ and by Christ only, and depends on what he is as distinct from what we are. But if “good works” (activities of serving God and others) do not follow from our profession of faith, we are as yet believing only from the head, not from the heart: in other words, justifying faith (fiducia) is not yet ours. The truth is that, though we are justified by faith alone, the faith that justifies is never alone. It produces moral fruit; it expresses itself “through love” (Gal. 5:6); it transforms one’s way of living; it begets virtue. This is not only because holiness is commanded, but also because the regenerate heart, of which fiducia is the expression, desires holiness and can find full contentment only in seeking it.
When James says that faith without works is dead (i.e., a corpse), he is using the word faith in the limited sense of notitia plus assensus, which is how those he addresses were using it. When he says that one is justified by what one does, not by faith alone, he means by “justified” “proved genuine; vindicated from the suspicion of being a hypocrite and a fraud.” James is making the point that barren orthodoxy saves no one (James 2:14-26). Paul would have agreed, and James’s whole letter shows him agreeing with Paul that faith must change one’s life. Paul denounces the idea of salvation by dead works; James rejects salvation by dead faith.
Though the believer’s works do not merit salvation and always have something imperfect about them (Rom. 7:13-20; Gal. 5:17), in their character as expressions of the love and fidelity that faith calls forth they are the basis on which God promises rewards in heaven (Phil. 3:12-14; 2 Tim. 4:7-8). For God thus to reward us according to our works is, as Augustine noted, his gracious crowning of his own gracious gifts.”