The Law-Gospel distinction has sometimes been thought of as "Lutheran" and thus not Reformed. This kind of thinking however obscure the very real similarities between traditional (confessional) Reformed and Lutheran thought. Both Reformed and Lutheranism came out of the same 16th century Reformation, and at the beginning they were not trying to be different for the sake of being different. Rather, whatever Luther and Lutheran theologians said that were biblical, the Reformed appropriated it. The Reformed of that time were about embracing and confessing the truth from Scripture, not about creating boundary markers against foes real and imagined except where necessary (and most definitely not against "Big Eva").
The Reformed view the Law-Gospel distinction typically with a more covenantal slant. Thus, the Law-Gospel distinction is translated into the Covenant of Works- Covenant of Grace distinction. In the Covenant of Works, we are told to "Do this and Live" (Lev. 18:5, Gal. 3:12). Since we cannot do, we stand condemned under the law, under the broken covenant of works. But under the Covenant of Grace, we are told "It is done." The Gospel proclaims to us what we cannot do of our own accord. We failed, we sinned, but where we fail, where Adam fail, Christ succeeded. We are now under grace, not because we do not have to obey the Law, but because we are not under the condemnation of the Law as a covenant of works.
While I will not yet commit to a definitive judgment on the Marrow controversy (in Scotland in the early 18th century), it seems to me that the Marrow men have it right. John Colquhuon (pronounced "ka-hoon") (1748-1827) was a Scottish Presbyterian minister who wrote what is probably one of the best books on the topic of Law and Gospel in the Reformed tradition. His book is entitled A Treatise on the Law and the Gospel, and is highly recommended for its balance and pastoral concern. Here are some choice quotes from the book:
In the Sinaitic transaction, the hewing of the latter tables of stone by Moses, before God wrote the Ten Commandments on them, might be intended to teach sinners that they must be convinced of their sin and misery by the law as a covenant of works before it can be written legibly on their hearts as a rule of life (p. 60)
The gospel, in this its strict and proper sense, seeing it is the form of Christ’s testament which consists of absolute and free promises of salvation by Him, contains no precepts. It commands nothing. It does not enjoin us even to believe and repent; but it declares to us what God in Christ as a God of grace has done, and what He promises still to do for us and in us and by us. (p. 105)
In the blessed gospel, Christ, and God in Christ, are freely offered to sinful men, and men are graciously invited as sinners to receive the offer and to entrust the whole affair of their salvation to Christ, and to God in Him (John 6:32; Isaiah 55:1-4) (p. 120).
The law wounds and terrifies the guilty sinner; the gospel heals and comforts the guilty sinner who believes in Jesus. (p. 151)
Whatever is required in the covenant of works as the condition of eternal life is, according to the covenant of grace, provided and given gratuitously to believing sinners. (p. 156)
The law, as a covenant of works and a rule of life, demands nothing of sinners but what is offered and promised in the gospel; and in the gospel everything is freely promised and offered to them which the law, in any of its forms, requires of them. (p. 161).
The law requires true holiness of heart and of life, and the gospel promises and conveys this holiness. (p. 168).
As it was the privilege of the Christians in Rome, so it is the privilege of all true Christians, in every place and in every age, that they are dead to the law as a covenant of works, and that the law in that form is dead to them. (p. 198)
As the relation between the husband and spouse is dissolved by death (Romans 7:2), so the relation between the law as a covenant and believers is, in the moment of their justification, dissolved (Romans 7:4). (p. 203)
When it comes to the Law and the Gospel, the twin dangers are Legalism (Gospel is not good news but more law), and Antinomianism (The Law is to be disregarded). Throughout the history of the Christian church, groups have veered into one or the other. If we embrace a Law-Gospel distinction, how should we understand these twin errors? Here Colquhuon puts it succinctly:
There are two errors respecting the deliverance of believers from the law which are equally contrary to the Oracles of Truth. The one is that of the legalist who maintains that believers are still under the moral law as covenant of works; the other is that of the antinomian who affirms that believers are not under it even as a rule of life. (p. 205)
In other words, the Legalist puts salvation dependent upon our good works. While they may pay lip service to grace, they hang the Law as a threat and motivator to goad believers to be good or to do good works. For legalists, we must preach the Law to make believers do good works, and imply that failure to obey the Law will make them somehow less welcome in God's sight.
The Antinomian does the exact opposite. The Antinomian does not really focus on good works. He is only interested to tell believers about "grace, grace, grace" without calling them to live holy lives for God. At best, an antinomian thinks of sanctification as an automatic process, and all anyone has to do is to think about grace and he will be holy.
Here, again, Colquhuon has excellent counsel for how we are to navigate the Christian Life. How should we live our lives and deal with the vestiges of our our sinful nature while cultivating the proper desire to do good works?
If Christ is the way to God and to glory, and it He is the way of holiness, or the holy way, then you who have believed through grace ought to take heed that you walk consistently in that way. “As you have, therefore, received Christ Jesus the Lord, so walk in Him” (Colossians 2:6). In union with Him, go forward daily in the exercise of faith and love, and in the practice of holiness. Depending on his grace and strength, advance with holy diligence and with increasing ardor in the daily practice of these good works which are works of faith and labors of love. Make constant progress in your exercise of faith, and by sanctifying and comforting influences from the fullness of Christ, walk on with cheerfulness and resolution in Him as your way to the perfection of holiness and of happiness. (pp. 317-318)
They not only look, therefore, to the law as a rule for authority to oblige them to the practice of good works, as well as for direction in performing them, but the look also to the gospel, and to the Savior offered in it, for strength to perform them, for merit to render them acceptable to God, and for a reward of grace to crown them. (p. 320)
The Law is the standard, the goal. But to the Christian, it the Gospel who gives them strength for sanctification. While desiring to obey the Law can be a motivator for good works, it must be grounded in one's love for God because of his gratefulness for an-already present salvation. Sanctification is about gratefulness, not about earning brownie points before God, for after all, who can give anything to the God who owns anything anyway?
The Law-Gospel distinction is a distinction that preserves the necessity of the Law and the glory of the Gospel. We must get it right in order that we may not put believers back under bondage, yet to encourage them to be holy and do good works. It is because of this that Colquhuon's book seem to be me very important for the task at hand, so that Christians can be edified and assured of their standing before God.