Below is an article by my good buddy and quartet-mate, Shane Scott, on the great question of faith/works and the relationship between then.  He does a great job demonstrating the contexts of both passages and exegeting the scripture, rather than reading into it his own meaning.  You can read more of Shane’s stuff at the link over on the side of the page. 

Oh, and don’t forget to vote SHANE SCOTT for PRESIDENT!!  See his campaign promo here:  http://youtube.com/watch?v=TN6kG4SwFRo

>>Shane’s Post:
In his 1522 Preface to the New Testament Martin Luther expressed his reservations about the book of James, which he described as an “epistle of straw.” He had questions about the identity of its author, but he was even more troubled by its seeming contradiction with the teaching of Paul on justification. At one point Luther offered to give his doctor’s beret to any man who could reconcile the teaching of Paul and James.

On the surface, it is easy to see why Luther was so perplexed. In Romans 3:29 Paul says, “For we hold that one is justified by faith apart from works of the law.” Yet in James 2:24 we read, “You see that a person is justified by works and not by faith alone.” We have basically two options: either Paul and James contradict each other, or they dare using the same terms to mean different things . And I believe this latter approach is correct.

In the first place, James and Paul are using “works” in two completely different ways. Paul is referring to works of the Law of Moses, especially circumcision, as the immediate context of Romans 3 makes clear. Romans 3 begins with this question: “Then what advantage has the Jew? Or what is the value of circumcision?” (3:1). It ends the same way: “Or is God the God of Jews only? Is he not the God of Gentiles also? Yes, of Gentiles also, since God is one—who will justify the circumcised by faith and the uncircumcised through faith” (3:29-30).

James, however, is not speaking of the works of the Law of Moses. Instead, he is referring to visible demonstration of genuine faith. “If a brother or sister is poorly clothed and lacking in daily food, and one of you says to them, ‘Go in peace, be warmed and filled,’ without giving them the things needed for the body, what good is that? So also faith by itself, if it does not have works, is dead” (James 2:15-17). The only sense in which James is speaking of the works of the Law is in the broad sense of fulfilling the command to love your neighbor as yourself (James 2:8; cited form Lev. 19:18), a concept that Paul completely favors (Rom. 13:9; Gal. 5:14). Paul agrees with James that genuine faith must work in love (Gal. 5:6).

Second, James and Paul mean different things when they speak of “faith.” Paul is referring to the initial act of trust in Jesus to become a Christian (Rom. 3:25). When James speaks about faith, he is referring to the phony claim of faith made by professed Christians. “What good is it, my brothers, if someone says he has faith but does not have works? Can that faith save him?” (James 2:14). James is decrying the empty assertion of faith that has no connection to reality, something Paul would not tolerate either.

Finally, James and Paul are using “justification” in two different senses. When Paul speaks of justification in Rom. 3:29, Paul is referring to declaration by God that we are in right standing. And he is consistent in teaching that our right standing is through faith in Christ rather than the works of the Law of Moses. There is another meaning of justification, though. Sometimes it means vindication. This is how Jesus used the term in Matthew 11:19: “Yet wisdom is justified by her deeds.” Wisdom is justified, borne out, vindicated, by its results. And so also is faith. James uses two examples of justification in this sense: Abraham and Rahab. In both instances, Abraham and Rahab had a belief in God that was later vindicated as genuine by their actions; Abraham in offering Isaac, and Rahab in protecting the spies of the God of Israel. Our works vindicate the genuine character of our faith, which Paul teaches as well (2 Cor. 5:10; Rom. 2:17).

I believe Luther allowed the nature of the debates of his day (perfectionism and ritualism) to define what the texts of Paul and James meant in their day, rather than reading Paul and James in light of the debates of their day. But properly understood, James and Paul are in agreement on the relationship of faith, works, and justification.