If we, to begin with, restrict ourselves to the fact that, according to the Lutheran conception, the believer as such does not need the law but only as one who has not yet been completely regenerated, and that, according to the Reformed conception, the believer precisely as a believer and a person who is regenerated needs the law, then without even considering the difference also in the definition of the law itself, a somewhat different understanding of faith itself becomes evident.
From the Lutheran standpoint, in the justified person faith, bringing with it the unio mystics, is such a unity of the human subject with the divine that he finds in himself the norm and stimulus for his actions. He no longer needs to receive this from the outside. Because he has been given the Holy Spirit, he is an independent source of a divine manifestation in his life and his activity. The law, therefore, does not stand over him anymore as something foreign to his will, but it has passed over into his will as the impulse of love, inflamed by the Holy Spirit…But in this life faith is never present in such ideal perfection. A believer, to be sure, soars in inspired moments to this pure height in keeping with his real nature. Otherwise, however, he still carries around with him the natural man, who only through a long and hard battle is transformed and enlightened by the Holy Spirit, active in faith.[i] Only because of the Old Man does the believer also need the law as a taskmaster of the flesh in the interest of the spirit. Thus the law has for him a negative function. All truly Christian, positive action, however, proceeds from faith itself, which receives from itself guidance and impulse – which is, naturally, to be compared with the law and verified by it.
For the Reformed, faith is, of course, also a unity with the divine, but only as a principle and beginning. Its actual realization lies in immeasurable infinity. It is not an ideal law which already includes in itself the totality of all development. Faith, as such unity created by the Holy Spirit, possesses the will, the striving and the abstract, general direction. But the norm for faith and the will, which is carried along by faith, in individual situations always is the divine will as something still standing over it, demanding the particular action. The ”you must” has not yet been overcome, but rather sharpened. Only now does the believer begin to understand the law in its spiritual nature. Its commands and promises, as well as its threats and prohibitions, become more penetrating because they are now understood in faith.
So, just because faith has been kindled, for that reason the law is necessary, which urges one on to action. It is precisely the regenerate person who needs the law for his development, his perfection, his positive progress, his manifestations of obedience and his good works, which should glorify God. By no means does he need the law only to control and discipline the unregenerate part in him….The law is necessary for him because it rests on the natural law of God, that is, because the difference between the finite and the infinite always continues, and the former can have its norm only in the latter. The norm of the infinite will always become known to the finite only as a categorical imperative. This is that being kept in the fear of God by the curb of the law [mentioned in the Geneva Catechism] also in the case of the regenerate person. The law must always preserve the reverence which is fitting for the finite as such over against the infinite.
This, then, is the basis for the Lutheran charge that Reformed piety is servile, legalistic and not evangelically free. The Reformed Christian fears nothing more than that under the pretext of evangelical freedom licentiousness might set in. That is why he emphasizes the law, so strongly at times that he comes dangerously close to infringing on evangelical freedom.
Thus Bayly writes, “One should live, therefore, as if there were no gospel and die as if there were no law. In life we should act as if no one but Moses ruled over us.”[ii] The Lutheran, on the other hand, fears nothing so much as work‑righteousness and is very concerned that the striving for sanctification which is based on faith might not become that.[iii] Therefore the law always serves him only to convict him of sin.[iv] That which is positively good is only a work of the freedom of faith in the Spirit. The law is needed only because the individual as the one who is acting is still always a sinner. In connection with the apostolic text about the law of freedom [James 1:25], the Reformed emphasizes the word law as real law, while the Lutheran emphasizes the word freedom as freedom from the law in the true sense of the word, so that the law of freedom signifies the norm that is present in the believer himself. The Reformed theologian mistrusts what is present in the believer in the form of something which merely motivates him just as we found him mistrusting faith, which is something direct and emotional in him. As the condition of being in faith must be demonstrated to his own self‑consciousness through works, so the subjective, impelling norm for action must be legitimized for him by means of the objective law.
[i] Strictly speaking, it is not the Old Man that is transformed and enlightened but the Christian, who, as he grows in sanctification, more and more puts off the Old Man and puts on the New Man (Eph 4:22‑24; Col 3:9,10).
[ii] Lewis Bayly, Praxis Pietatis (Bern, 1703), p 125. Bayly (1565‑1631), was an English preacher and churchman, who had a great influence on German Pietism. His Praxis Pietatis was translated into many languages.
[iii] That is, that it does not become work‑righteousness. One cannot deny, however, that as the Reformed with his position denies evangelical freedom, so the Lutheran can all too easily fall into spiritual inactivity and fleshly security. That we too do not completely avoid this danger follows from the fact that the abundance of works, which the Reformed sects can exhibit in such great measure, is lacking among us. We think only of the great sacrifices which the Reformed sects bring for the local congregation, for educational and charitable institutions and for missions, while among us financial need in all branches of church activity is a chronic condition. Even in that one area in which we until now stood far in front of the Reformed churches, namely, in the area of the parish school, our zeal is beginning to flag because its maintenance demands continuous effort and expenditures. The parish school is, of course, not of divine institution or command, and our faith now does not have enough strength and energy to overcome the indolence of the Old Adam. If we regarded the school and other branches of church activity as a strict divine command, then our zeal for its maintenance and improvement would perhaps be greater. But that we would thereby be richer in real good works cannot be proved, for all good works are good only in so far as they proceed from faith itself freely and not forced by the law. Accordingly, the cure for our lack of works does not consist in this that we become more legalistic in our Christianity and adopt something of the Reformed spirit, but in this that we, in a genuinely Lutheran spirit, apply the law in its sharpness as a mirror to our lazy flesh, that we allow ourselves to be judged and condemned by it, that we become alarmed at our lack of energy because of which we neglect God’s kingdom and poor souls, and that we flee again to grace and from its fullness and fervor, which surpasses all human thought, acquire for ourselves new, free, spiritual willpower.
[iv] Just as the law serves as a mirror, so naturally it serves also as a rule and curb—because of the flesh.
August Pieper, “The Difference Between The Reformed And The Lutheran Interpretation Of The So Called Third Use Of The Law“. The paper is predominantly one long quote from a portion of Matthias (Max) Schneckenburger’s book, “A Comparative Presentation of the Lutheran and Reformed Concept of Doctrine”, published in 1855.