Faith or good works?
In order to really answer the question, you have to consider what you are asking. Are you asking which is necessary? In that case, the answer is both.
Are you asking which is necessary in order to be considered right with God? In that case, the answer is faith. You are made righteous solely by faith in the finished work of Christ.
But what if you are considering what makes you right with your neighbor?
Are you righteous in the eyes of your neighbor based on your faith in Jesus? Or does righteousness in your relationships with others depend on the work that you do? In your relationships with friends, family, and coworkers, righteousness might be considered as something that depends on our work.
Throughout the scriptures we can see a distinction in two kinds of righteousness. There is a righteousness that comes solely from the work of Christ. It describes our standing before God. And there is a righteousness that comes in our relationship with our neighbor.
The righteousness we have before God is completely passive. It’s not our doing, it’s all God. And the righteousness we have before our neighbor is active. It relies on our own work.
"This is our theology, by which we teach a precise distinction between these two kinds of righteousness, the active and the passive.” - Martin Luther, Lectures on Galatians
And teacher of mine said it this way:
"What is meant by two kinds of human righteousness?…One dimension involves our life with God, especially in the matters of death and salvation. The other dimension involves our life with God's creatures and our activity in this world.In the former we receive righteousness before God through faithon account of Christ. In the latter, we achieve righteousness in the eyes of the world by works when we carry out our God-given responsibilities.” - Charles Arand, Lutheran Quarterly
When it comes to the righteousness we have before God, it rests solely on the work of Christ. Jesus declared, “It is finished.” Martin Luther described us as “beggars.” We are completely passive in our relationship with God, powerless to do what only God can do.
Passive righteousness is the vertical relationship between God and man. God does the work. The only contribution that man brings into this equation is sin. This is a righteousness that is alien; it is completely outside of ourselves.
This alien righteousness, instilled in us without our works by grace alone—while the Father, to be sure, inwardly draws us to Christ—is set opposite original sin, likewise alien, which we acquire without our works by birth alone. Christ daily drives out the old Adam more and more in accordance with the extent to which faith and knowledge of Christ grow. - Martin Luther
This is why Romans describes man by saying, “No one is righteous - not even one.”
Before God, no man by his own actions is made righteous. This is why Wingren described Luther’s words when he said, “God doesn’t need our good works.” Because our righteousness in the vertical realm does not come from anything we do, but only from God’s action toward man.
When it was said that God doesn’t need our good works, he continued by saying, "but our neighbor does."
In our horizontal relationships, our righteousness is not passive, it is active. We not only have relationship with our creator (passive), but we also have relationships with our neighbors. In our relationships with the world around us, God calls us to be active serving the world around us.
Active righteousness is what we do in our communities, our neighborhoods, our families, and our jobs. Active righteousness is where we fulfill our God-given vocations.
The passive righteousness we have freely through faith; active righteousness requires that we serve those around us in the places that God places us.
Why this distinction matters?
A proper understanding of these two kinds of righteousness is important because we must not confuse the two.
If we confuse the two and think that active righteousness establishes our relationship with God, we will trust in ourselves for salvation. Instead of relying solely on God in the vertical relationship, we will find ourselves relying on our own ability to follow the commandments or serve our neighbors.
If we confuse the two and think that passive righteousness carries over from our vertical relationship into our horizontal relationships, we will end up ignoring the needs of our neighbors. When we ignore active righteousness, we ignore our callings to our family, to our communities, and in our careers.
Instead we must see these two kind of righteousness clearly. In our relationship with God, we are recipients. We, like beggars, receive the gifts that only God can give. And in relationship with the world, we actively seek to do good and serve our neighbors. And these two kinds of righteousness, while distinct, are also deeply connected.
Our passive righteousness inspires our active righteousness. Because we are free from having to earn our salvation, we are also free to do good for our neighbors. This is why Martin Luther said, “We are saved by faith alone, but the faith that saves is never alone.” Good works will follow. The righteousness that comes passively through faith always flows out into an active righteousness that loves the neighbor.