Both Paul and James were apostles writing under the inspiration and authority of the Holy Spirit. So we should not assume too quickly that their teachings are incompatible.
Is James correcting a misunderstanding?
There may well have been some individuals within the churches who argued that the principle of justification by faith made behaviour irrelevant – an error that Paul also felt obliged to address (Romans 6:1,2). It is more likely that James is countering this misinterpretation of Paul’s message than attacking Paul himself.
If this is correct, then both James and his readers must already be convinced that justification is by faith. Indeed, James’ question in James 2:14 (“What good is it, my brothers and sisters, if someone claims to have faith but has no deeds? Can such faith save them?”) seems to assume it. It is hardly surprising. then, that James doesn’t waste any time going over what is common ground for them. He doesn’t need to argue for justification by faith, because no-one disputes it; instead, he wants to dig deeper into the phrase and explain that there is potentially more than one type of faith. There is a faith that produces works, and there is a ‘faith’ that does not. The former is the kind of faith that justifies, but the latter is an intellectual kind of faith that is little more than wishful thinking. James is merely insisting that we must have the right kind of faith (James 2:24).
This would explain why both James and Paul can use Abraham as an example. Abraham’s faith was the kind of faith that justifies, precisely because it was the kind of faith that resulted in works. Abraham not only believed in one God, but also trusted and obeyed that one God, even to the point of being prepared to sacrifice his son; and so God’s verdict in Genesis 15:6 was confirmed by Abraham’s actions in Genesis 22.
Or are they addressing completely different issues?
It does seem as though James and Paul are using the word ‘works’ to mean different things. Paul is worried that his Gentile converts will be bullied into keeping the ceremonial rules of the Jewish Law in order to achieve acceptance by God; James is concerned that Christians will lay undue emphasis on orthodoxy of doctrine, to the neglect of practical application.
If we read James’ letter carefully, we see that the ‘works’ that he is talking about are not the ‘works of the law’ that Paul raged against, but rather ‘works of faith’ (James 2:17,22). The law is mentioned several times elsewhere in his letter, but is notably absent from this particular section (James 2:14-26). Also, he makes no reference to the ceremonial issues that were the main bones of contention between Paul and his opponents: circumcision, the Jewish festivals, and the food laws. The ‘works’ that James has in mind are those that fulfil the commandment to love one’s neighbour (James 2:8,15,16). According to James, such works are not in competition with faith; rather, they are the outworking and proof of genuine faith. This is completely in line with Paul’s teaching that Christians will naturally do ‘good works’ (e.g. Galatians 5:13; Titus 2:14), and that by loving their neighbours they will fulfil the law (Romans 13:8-10; Galatians 5:14). So there is no disagreement here.