I am currently doing an independant study on the so called, "new perspectives on Paul." Pauline theology is one of my greatest interests, and I hope to someday be a scholar who will be able to offer something in this debate. I am going to give a brief overview of each section of E.P. Sander's Paul and Palestinian Judaism, the first important volume in this movement. I know many do not have the time to read through this much material themselves, so I am hoping to be of aid to those who would like to understand this movement.
Part 1: Palestinian Judaism
Sanders briefly overviews the different evaluations of second temple Judaism which scholars have promoted in the recent past. In the 19th century, due to the work of F. Weber, it was generally understood that Judaism of the second temple period was a religion of "works righteousness." Jews supposedly believed that God would weigh one's good deeds against his bad to determine the fate of that man. One could gain extra merit through a "treasury of merits" of sorts. Sanders concludes that Weber's evaluation was deeply flawed, though remained somewhat unchallenged in his day. This same view of Judaism was promoted by Bousset, Schurer, and Bultmann. Many Jewish scholars refuted Weber's claims, and Sanders believes succesfully, yet there work was not of much effect. Weber's view still was the majority opinion.
Sanders wants to prove that Weber's view is flawed by evaluating the writings of the second temple period extensively. According to Sanders, there is an overall coherence of the "pattern of religion" in Judaism. Though there were certainly diverging views of Judaism in the second temple period, there was an overall basic soteriology which permeated the majority of second temple literature. Sanders labels this soteriology "covenantal nomism." Covenantal nomism is the idea that the Jews believed themselves to be in the covenant by grace, but maintained there status in the covenant by obedience. In other words, the emphasis was on God's electing grace, rather than on strict law-keeping. God chose the nation of Israel to be His own, thus one is in the covenant by God's choice, not by works. The role of law-keeping was one of maintaining status, rather than gaining status. One could lose "salvation" by breaking the commandments, yet one could not gain "salvation" by keeping commandments.
The question naturally comes as to why God elected the nation of Israel. Sanders writes that there were three different answers to this question in second temple literature. One answer is that the covenant was offered to all nations, yet Israel was the only one to accept it. The second opinion is that the nation was chosen because of the merits of the patriarchs. The third, was that God elected the nation simply because he chose to. It was a matter of pure grace. The first two answers still put the covenant in the hands of human merit, yet Sanders does not see this as harmful to his thesis. It does not matter how or why the covenant was initiated in the first place. What matters is that those in the covenant in the second temple period, were personally initiated apart from what they had done. It seems to me that the first two responses do not coincide well with Sanders overall thesis. Whether or not the merit of the descendents of the patriarchs gained the covenant, it was still gained by human merit. I find it interesting that some thought the covenant was initiated because of the merits of the patriarchs. This means that it would not be an idea foreign to Judaism for Paul to say that we are saved by the righteousness (or merit) of another, namely the Godman Jesus Christ. Perhaps this framework allowed Paul to frame his ideas in such a way as to be understandable to a Jewish audience.
Sanders certainly is right in showing the sloppiness of much scholarship dealing with the second temple literature. Often no differentiation was made between Tannaitic and Amoraic material, and it had been simply assumed that Rabbinic Judaism was identical to Pharisaic Judaism. Sanders convincingly shows that there is more to Jewish soteriology than a simple weighing of merits. One would try his best, and when he failed there was the system of atonement in the law which would restore him, and assure him that his sins had been forgiven. One is often said to be rewarded for his goodness, and for his deeds, yet it is not that one earns salvation through these merits, but that one maintains his status and proves himself through these merits. The just God must reward righteousness, and punish evil, yet not in such a way as to say that a man earns that status. He is only aided to righteousness by God grace. When Sanders runs into a passage that seems to contradict his idea, he resorts to saying that they were no systematic theologians, thus were not careful and could be inconsistent.