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I think it's pretty universally accepted that God is wholly good. Indeed, many sources, including lots of answers on this website, are based on the belief that God is the perfect standard of goodness. God is also widely believed to hate evil, hence why transgression from His perfect standard of goodness (sin) is taken so seriously and required such amazing grace to save His people.

However, in church this morning we were looking through 1 Samuel 16 and verse 14 alarmed me somewhat:

1 Samuel 16:14 Now the Spirit of the Lord had departed from Saul, and an evil spirit from the Lord tormented him. (NIV)

I would never have believed that an evil/harmful spirit could be from God had I not seen it in the bible. On further investigation, it appears there are several other examples in the bible of God purposefully bringing evil things into the world.

Isaiah 45:7 I form the light, and create darkness: I make peace, and create evil: I the Lord do all these things. (KJV)

Amos 3:6 Shall a trumpet be blown in the city, and the people not be afraid? Shall there be evil in a city, and the Lord hath not done it? (KJV)

2 Thessalonians 2:11 And for this reason God will send them strong delusion, that they should believe the lie (NKJV)

I'd always been told that God may allow us to be exposed to evil but doesn't bring it upon us Himself. This is clearly false in light of the above. It's therefore also possible that evil is God's will, which is particularly disappointing and devastating to one's faith.

Can anyone please offer any explanation as to how a totally-good God can create evil deliberately and still remain holy and righteous?

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this is interesting –  tunmise fashipe Jul 29 '12 at 17:54
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@AdamGeorge Hi, welcome to Christianity SE. Thanks for this fascinating question. –  Monika Michael Jul 29 '12 at 18:01
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Hi Adam, and welcome to Christianity.SE. It sounds like your question is an interesting Christian perspective on what is called "the problem of evil," or "theodicy." Here's a link to a similar, though not identical C.SE question that you may find helpful. Cheers. –  Philip Schaff Jul 29 '12 at 22:08
    
@JBunyan Thanks. This question is actually among those I read earlier that prompted to ask this more specific one. –  Adam George Jul 29 '12 at 22:52
    
The answer to Thessalonians 2:11 was in (verse 10 - which you didn't notice) They perish because they refused to love the truth and so be saved - Culled from my answer –  tunmise fashipe Jul 30 '12 at 20:07
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The question I will try to answer is:

Can anyone please offer any explanation as to how a totally-good God can create evil deliberately and still remain holy and righteous?

I will attempt to explain this from the point of Original Sin. This is becuse I myself struggled to understand this for some time and found that this can be explained better from that point of time.

It is difficult to understand the mind of God and we as humans are definetly far short of knowing His wisdom. Over the time, God has made himself known to mankind in various ways and but it is through Jesus that He demostrated His Kindness and His love towards His creation.

From the very beginning, man held a special and unique place in God’s creation as he was created "in the image of God". In his own nature, man unites the spiritual and material worlds.

God’s gift of free will.

God created Adam and Eve with unique characteristics called free will and gave them a choice: to obey Him or disobey Him which is same as choosing good or evil.

God is a personal being and the greatest passion of personal beings is the desire for personal relationships with other personal beings. Therefore, God, as a personal being, created us in such a way that He could have a meaningful, personal, and loving relationship with us. Nevertheless, this had a severe price.

I cannot experience love from you unless you have the capacity to do otherwise. If you have the capacity to, not to love me, and you choose instead to love me, then that choice has validity and meaning. You cannot have a love relationship with a computer. It is pre-programmed to serve you. Without that choice, man would have been like puppets, able to do only what God wanted.

God therefore wanted to demonstrate his glory through humans, which had their own free will. When he receives the glory and obedience from humans in spite of having with them the free will, it is an immense satisfaction for Him. God expects that his most important creature would give greater glory to Him by remaining obedient, in spite of having free will with them.

But why God created evil?

God did not create evil as nothing evil can come from good God. Satan and other demons were at first good angels, created by God, but they became evil by their own doing. This "fall" also came from the free choice of these created spirits, who radically and irrevocably rejected God and his reign. Their aspiration was to become like God, which is reflected in the tempter's words to our first parents: "You will be like God." It is the irrevocable character of their choice, and not a defect in the infinite divine mercy that makes the angels' sin unforgivable. So we see that evil is a side effect of existence of free will and choice.

There is no repentance for the angels after their fall, just as there is no repentance for men after death.

The power of Satan is, nonetheless, not infinite. He is only a creature, powerful from the fact that he is pure spirit, but still a creature. He cannot prevent the building up of God's reign. Although Satan may act in the world out of hatred for God and his kingdom in Christ Jesus, and although his action may cause grave injuries - of a spiritual nature and, indirectly, even of a physical nature - to each man and to society, the action is permitted by divine providence which with strength and gentleness guides human and cosmic history. It is a great mystery that providence should permit diabolical activity, but "we know that in everything, God works for good with those who love him."

Why then did God do this when he knew in advance that the result of free will and evil would be so disastrous?

Many questions comes to mind at this stage. Questions like Did this God of love not care that war, murder, rape and so much senseless violence would be the result of his choice to give us free will?"

Why an all-powerful God did not eliminate evil? Since the implication is that the removal of all evil would permit a better, more loving world.

A truly loving God, would have desired and created such a world because it is clearly superior to the one we have.

Any God that did not follow this logic was not a God of love, but an evil tyrant. Answer is bit difficule as I have mentioned at the begining as we do not have the intellect to understand the almighty God. But a simple story I read comes close to explaining this mystery:

Suppose a mother had three children and one of them died. If you could go back to the time before she had any children, with the knowledge that one of them would die this horrible death, would she attempt to have children?"

A mother would definitely say yes. Because, the love and the joy and the happiness that parents received from their children, far outweighs the pain, suffering and misery they experienced from the loss of that one child.

In this there is an incredible insight as to why God allows free will and evil to exist. A loving God can allow an evil state of affairs to exist, since in allowing it to occur, it brings about an even better state of affairs.

Because He is outside time and knows all things, He knew that there would be tremendous pain and suffering as a result of His decision to create a people with the capacity of choice and, consequently, the capacity to sin.

But God, like this mother, knew that the love He and his human creatures would experience, would outweigh the pain and suffering that would result from His decision to create us as He did. The consequences of God's decision were not unforeseen. They were foreknown!

The moment evil is taken out from this world you also remove the choice from the nature of human. The existence of evil is the "side effect" of creating a world with a thirst for love.

A world possessing both evil and love, is far superior to a world where neither is possible. For God to eliminate evil, He would have to eliminate our capacity of choice and thus our capacity to do both evil and good. And such a world is inferior to the one we have: one where love is possible, despite its inherent evil. What kind of God would do this? Only one kind. A God of love.

On the other hand, there is another question. Is God a "limiting God" and not omnipotent?

This is based on flawed logic. It's the same logic flaw atheists use when they say, "If God can do anything, can He create a rock so heavy He can't lift it?" There are logical impossibilities and there are things God cannot do. (Lie, be wrong, learn, sin)

Finally, we come to the first instance of Adam’s disobedience to His creator. What is The tree of the knowledge, and why does God put it in the garden?

It seems like putting your children in the backyard to play and saying, "By the way, don't jump in the pit with the spikes lining the bottom that I dug in the back corner by the swing set, okay?"
God was giving a simple message to man: "Evil" is the things that you're not supposed to do, "good" is the things that you should do. The only thing you need to know about "evil" is don't eat from that tree.

Adam was in the state of original holiness whence he was not able to differentiate between good and evil for he was yet to eat the fruit from the forbidden tree. Adam is not able to differentiate between good and evil for his nature was such that he was not in a position to recognise the difference. It is like a computer, which is unable to recognise a PDF format of a file unless an adobe reader is installed on it. The computer knows that PDF file exists but will not execute it, because it does not have that capacity to recognise it. Adam knew that evil exists but he is neither able to recognise it nor he was able to execute it. Under these circumstances, neither God wants that Adam should know about the good and evil by forbidding him from eating that fruit and continue in his present state.

For this, he has to only obey God’s commandment not to eat from the forbidden tree. But here also there is a glitch, because there was no way Adam could exercise his free will, in absence of his knowledge about good and evil and show his obedience to God. The only way God could know the obedience of Adam was to tell Adam not to eat from this tree, which would allow Him to know the free will choice of Adam about his obedience to Him.

As a consequence of free will, God kept the CD containing the programme “Adobe Reader” (tree of knowledge) in the garden which will enable Adam to recognise the PDF file format (good and evil) and also allow him to execute the file with PDF extension. There are two aspects here. First – till the time Adam obeys God’s command and do not eat from this tree, he will exercise his free will and be obedient to God. Till that time this programme was not installed on Adam, he would not be able to read and execute this file (evil). The moment Adam disobeys God, Adam will exercise his free will and this programme will be installed on Adam and will recognise the good and evil as well as able to execute it (evil) also.

Before the fall, they were having a nature that made them to do only the good and the power to do evil was beyond their area of understanding. This understanding and the change of their nature would come only when they disobey God and eat the fruit from forbidden tree. With this, one obedience Adam was supposed to live a life doing everything good and not knowing or doing evil. The obedience would have kept him barricaded from being dying.

Sources: Many and few of them are www.y-jesus.com/

www.gotquestions.org/

www.khouse.org/

www.newadvent.org/bible/

www.vatican.va/archive/ccc_css/archive/catechism/ccc_toc.htm
PS. My apologies for this answer being so lenghty but I could not make it any more shorter, though I tried.

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"God created Adam and Eve with unique characteristics called free will" - how is it unique? to whom is it unique? –  Marc Gravell Jul 31 '12 at 7:58
    
"... by unique I meant matchless. The unique characteristic for God's prised creation (human race). I termed it unique as man, in addition to having free will was also created in the "Image of God". Regarding the second query I presume you have not read the answer fully. –  JoaoRodrigues Jul 31 '12 at 10:09
    
so is the statement there: animals do not have similar free will to humans? (I'll delete the other ; probably not constructive). Of course many (Sam Harris etc) would put a strong case that humans don't have free will. Interesting topic. –  Marc Gravell Jul 31 '12 at 11:04
    
Interesting points about Satan and demons being fallen angels who rejected God's reign - that's nothing I've ever heard before. Where is the biblical evidence for this? –  Adam George Jul 31 '12 at 21:18
    
@Adam George..please see the link angelfire.com/mi/dinosaurs/lucifer.html –  JoaoRodrigues Aug 1 '12 at 5:54
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For Isaiah and Amos, this is an issue in translation. The Hebrew word for "evil" is [ra']. This word also means: bad, spoiled, calamity, hurt, trouble, etc. So [ra'] could be used to both describe spoiled milk, and a city leveled by an earthquake. In english evil is evil. You wouldn't call spoiled milk evil, you would say it is bad, or spoiled. In Hebrew it's the same word translated differently.

In the scriptures you referenced there are some good resources on the web to explain those. I will provide some excerpts here:

"I am the Lord, and there is no other; Besides Me there is no God. I will gird you, though you have not known Me; 6That men may know from the rising to the setting of the sun That there is no one besides Me. I am the Lord, and there is no other, 7The One forming light and creating darkness, Causing well-being and creating calamity; I am the Lord who does all these," (Isaiah 45:5-7).

Notice that the context of the verse is dealing with who God is, that it is God who speaks of natural phenomena (sun, light, dark), and it is God who is able to cause "well-being" as well as "calamity." Contextually, this verse is dealing with natural disasters and human comfort issues. It is not speaking of moral evil; rather, it is dealing with calamity, distress, etc. This is consistent with other scriptures

"Shall a trumpet be blown in the city, and the people not be afraid? shall there be evil in a city, and the LORD hath not done it?" (Amos 3:6).

Also, take note that Isaiah is presenting contrasts. He speaks of "light" and "darkness," "well being" and "calamity." The word "well-being" in the Hebrew is the word for 'peace,' "Shalome." So, in the context, we are seeing two sets of opposites: Light and dark, peace and non-peace, or well being and calamity. The "evil" that is spoken of is not ontological evil, but the evil experienced by people in the form of calamity.

Again here we are dealing with the proper translation of [ra'].

For the verse from Samuel once the spirit of the Lord was no longer with him, he was open to evil spirits and God allowed the spirit to take possession of Saul.

when the Bible says that the “distressing spirit” that troubled Saul was “from the Lord,” the writer was using an idiom to indicate that the Lord allowed or permitted the distressing spirit to come upon Saul.

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You clarified the scriptures to show us that God does not create evil, but calamity, and He uses natural phenomenon to bring His people to repentance. –  Steve May 27 '13 at 16:39
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This question is not that different from God hardening Pharaohs heart.  It has never personally bothered me though many other things have. They way many take this is simply that for sin, God often punished sinners by heading them over to greater sin.  God can't properly temp men to sin or directly create sin, or cause more sin, but indirectly through sinful men, and sinful demons, he can arrange it so that sinners are given over to greater sins.  It is more like He withdraws himself from sinners as a punishment.  Even his holy laws are said to increase sin indirectly on account of mans sinfulness.

However, the scripture as you have quoted, also describes this withdrawal in an active sense indicating the punishment.  This means God withdraws his mercy in a particular way designed to accomplish his providential will.  The same applies to his hardening Pharaoh's heart.  If a man deserves eternal burning is it really a surprise that God might postpone that eternal punishment and use lesser forms of punishment to accomplish his will? Even for those he loves, is it not possible that God allows us to be tempted, in order that our sins might be exposed that would otherwise remain hidden in our hearts?

The whole notion implied is fairly standard in terms of describing God's management of sinners in this world. Paul makes specific arguments about why the world has become so wicked, partly because God punishes sin with more sin. Yet God is not the tempter but sin is drawn out of sinners because the desire is already there and temptation is loved before it is encountered.

Therefore God gave them over in the sinful desires of their hearts to sexual impurity for the degrading of their bodies with one another. 25 They exchanged the truth about God for a lie, and worshiped and served created things rather than the Creator—who is forever praised. Amen. 26 Because of this, God gave them over to shameful lusts. Even their women exchanged natural sexual relations for unnatural ones. 27 In the same way the men also abandoned natural relations with women and were inflamed with lust for one another. Men committed shameful acts with other men, and received in themselves the due penalty for their error. 28 Furthermore, just as they did not think it worthwhile to retain the knowledge of God, so God gave them over to a depraved mind, so that they do what ought not to be done. (NIV Romans 1:24-28)

We must not think of God tempting sinners when he allows their sinful dreams to come true, and arranges things in order to draw out their lusts:

When tempted, no one should say, “God is tempting me.” For God cannot be tempted by evil, nor does he tempt anyone; 14 but each person is tempted when they are dragged away by their own evil desire and enticed. 15 Then, after desire has conceived, it gives birth to sin; and sin, when it is full- grown, gives birth to death. (NIV James 1:13-15)

So we see men sin, and men cause sin, but God can judge it by giving sinners over to their bondage under the Devil who is their rightful master while they remain cursed and slaves of sin.

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The argument usually made is something like this:

  1. God created everything
  2. Evil exists
  3. So God created evil

The problem with this argument is its second premise that evil is something. The fact is evil is not a thing it is a lack or privation of good thing that God made.

Christian Philosopher J. P. Moreland notes:

"Evil is a lack of goodness. It is goodness spoiled. You can have good without evil, but you cannot have evil without good.

Goodness has existed as an attribute of God from all eternity. While God is perfectly holy and just, he is also perfectly good. Just as God has always existed, so too has goodness as it is a facet of God's holy character. The same cannot be said for evil. Evil came into being with the rebellion of Satan and subsequently entered the physical universe with the fall of Adam.

Christian apologist Greg Koukl has said:

Human freedom was used in such a way as to diminish goodness in the world and that diminution, that lack of goodness, that is what we call evil.

When God created Adam, He created him good and He also created him free. However in creating Adam free, God indirectly created the possibility of evil, while not creating evil itself. When Adam chose to disobey God, he made this possibility a reality. The same scenario had played out when Satan fell by failing to serve and obey God. So it turns out that evil is not a direct creation of God; rather evil is the result of a persons (both angelic and human) exercising their freedom wrongly. While evil is certainly real, it is important to recognise that evil does not have existence in and of itself. Rather it only exists as a privation( or a parasite) on the good. It exists in the same way that a wound exists on an arm or as rust exists on a car. The rust cannot exist on its own any more than cold can exist without the existence of heat or darkness can exits without the existence of light.

Recently in one of the debate that I came across William Lane Craig is Research Professor of Philosophy at Talbot School of Theology in La Mirada, California argued that:

God cannot force people to freely do anything – freedom is not compatible with determinism. Freedom is a good, but freedom opens up the possibility of moral evil. You cannot have the good of free will without allowing people to choose to do morally evil things. God can permit evil and suffering in order to bring more people into a relationship with him. The atheist has to show that God could allow less evil and achieve more knowledge of God in order to say there is too much evil. The purpose of life is not happiness, but knowledge of God.

This is also a good read

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I struggled with this for many years until I read the book of Romans 9:12-23.

Especially, these verses say it all

Romans 9

18 Therefore hath he mercy on whom he will have mercy, and whom he will he hardeneth.

19 Thou wilt say then unto me, Why doth he yet find fault? For who hath resisted his will?

20 Nay but, O man, who art thou that repliest against God? Shall the thing formed say to him that formed it, Why hast thou made me thus?

Here is what I discovered

1) God knows the end from the beginning but we are short-sighted.

  • The children of Israel suffered at the hands of Pharaoh for almost 400 years IN AGONY and GREAT PAINS for the sins they did not commit. But God was preparing them for the coming of Moses and the great salvation. The result is PASSOVER is one of the memorable event in the history of Israel. They actually learn in the end how great God is._

  • Joseph went through difficult times so he could be positioned to fulfil the prophechy of God by bringing Israel into the land of Egypt to suffer though he was not aware of it_

  • The evil spirit on Saul: may be God want David to be brought to the palace somehow to fulfil some kind of purpose e.g. being close to the throne he would inherit, learning the ways of the palace or royal people, being friend with Jonathan who made a significant impact in his life later, I can't say._

2) If you are not the chosen you are in trouble because you will be used to service the chosen. Imagine the number of people God destroyed and sent out of their lands for the children of Israel to occupy - that is not fair in human reasoning

3) This kind of overlap with No.2: We are nothing and worthless, we are his properties, but it is God who decides to place importance on us. So he decides what to do with us whenever he wishes. That is the essence of grace That is why the first might become the last and we need to pray for God to have mercy. Our righteousness cannot save us it is only God's mercy

Romans 9:20 Nay but, O man, who art thou that repliest against God? Shall the thing formed say to him that formed it, Why hast thou made me thus?

4) In the case of Pharaoh: God wants to bring the Greatest glory to himself among the gentiles and for his people.

Romans 9:22 What if God, willing to shew his wrath, and to make his power known, endured with much longsuffering the vessels of wrath fitted to destruction

5) Some position themselves for destruction. We position ourselves for destruction when we endlessly struggle with God/Holy Spirit. That is seen in the case of Ahab when the lying spirit was sent to him. He wanted to hear sweet words and he even tried to bribe/cajole Micaiah to speak sweet words. You need to read the passage carefully

2 Chronicles 18

6 But Jehoshaphat said, Is there not here a prophet of the Lord besides, that we might enquire of him?

7 And the king of Israel said unto Jehoshaphat, There is yet one man, by whom we may enquire of the Lord: but I hate him; for he never prophesied good unto me, but always evil

The answer to this (and Thessalonians 2:11) was in (verse 10) and in every sort of evil that deceives those who are perishing. They perish because they refused to love the truth and so be saved which you overlooked .

Micaiah knew he wanted sweet words but he finally told the truth which the king did not take. 14 And when he was come to the king, the king said unto him, Micaiah, shall we go to Ramothgilead to battle, or shall I forbear? And he said, Go ye up, and prosper, and they shall be delivered into your hand.

The king was trying to influence the prophet to speak sweet words but he knew it should never be so he pressed him

15 And the king said to him, How many times shall I adjure thee that thou say nothing but the truth to me in the name of the Lord?

The same is the case of Judas. Judas already fit the profile of destruction so he was chosen. He was covetous and loved money. He was tempted by money to betray Jesus because he had the tendency. When the woman with the alabaster box was ministering to Jesus, Judas was concerned about how much the oil and the box worth

There are several other verses but if I had to speak more on this it will span multiple pages.

This might not be the best answer but I hope you could pick some points from it.

God bless you

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This is the classic question of "theodicy" which is often viewed as a philosophical problem within the theology of God.

A reformed perspective on this question is that the highest good in the universe is that God is glorified, which means for God to be publicly portrayed as "good," or more specifically for God to put his attributes on display via demonstration.

For example, if God is graceful, that means he has a "gracefulness" attribute. He would demonstrate this attribute by giving a gift to an undeserving party.

Yet possession of an attribute is basically meaningless if that attribute is never put into action. It's like claiming to be the fastest mile runner in the world, yet you have never run before. What does it mean to be the fastest miler if you've never run a mile at the fastest time?

Hence by putting his attributes into action God glorifies himself and achieves the highest possible good in the universe by doing so.

The controversy shows up once you realize that there are attributes of God which only make sense in response to evil.

How could God demonstrate himself to be just or forgiving if there is no sin to judge fairly or forgive?

So the next controversy is that we must believe that God has a will of decree, that is, the ordination of what actually ends up happening, without simultaneously being the author of evil. Typically, that seems to occur via moral agents who, while having a legitimate choice and being thus culpable for their immorality, also are evil by nature and thus always make decisions that are rooted in immorality.

Nonetheless, since God never revoked his sovereignty he has the ability to suppress and steer the decisions of moral agents such that the course of history is always under his dominion. The prime example of this is in the life of Joseph in which the course of Joseph's entire life was set forward by people sinning against him, yet Joseph declares that what they meant for evil, God meant for good. Ultimately, their sins were instrumental in causing the family of Israel to find favor in Egypt during the global famine and have ample food, and root Israel in Egypt to set the stage for the Exodus where the Jews would be transformed from an emerging people group to a nation of God's people. All set forward by the sinful actions of Joseph's brothers, the sinful actions of Potiphar's wife, and the sinful actions of Joseph's fellow inmates.

If you'd like to explore other biblical case studies, I would recommend John Piper's book, Spectacular Sins.

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So you're asking "how". The best explanation I've heard is an analogy with Shakespeare writing the story Macbeth. In the story, Macbeth kills the king. Now, in the context of the story, is Macbeth guilty for killing the king? Absolutely: he did it! Is Shakespeare guilty of killing the king? No, he didn't kill anyone. Could Macbeth have done differently? No, because that's the way Shakespeare wrote the story!

So God ordains evil to happen (there's loads of verses here to support this, including ones you've pointed out and the Isaiah 45 passage that @dcreight mentioned), but is not Himself the author of it - that is, He is not guilty of evil Himself. It's this same kind of "difference in level" or "difference in existence" between God and man as there is between Shakespeare and Macbeth.

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is Macbeth really a moral agent, though? Does he, in any sense, have a "free" will to chose to sin or not to sin? WCF refers to secondary causes through which God acts such that sin is never directly attributable to him; Shakespeare, on the other hand, directly writes Macbeth's thoughts and deeds with his own pen. –  Ray Jul 31 '12 at 7:38
    
Define "free will". It seems like you're defining it to mean "able to sin or not". That would be similar to my favorite definition: "the ability to please God." Using this definition, only the redeemed have "free will". The natural man always sins. Even his "good" actions are tainted by sinful motives (pride!). This is "total inability". While the natural man is not as bad as he could be, he's still tainted in every level of his being. Without regeneration, he will always choose to sin. So is Macbeth a moral agent? If by that you mean does he have a free will, I would say no. He is not saved. –  Adrian Keister Jul 31 '12 at 9:48
    
@Ray: God does foreordain whatsoever comes to pass, as the WCF says. He does "write history with His own pen". God is sovereign, and man is responsible for his own sin. The Bible teaches both quite clearly. I do not see a contradiction in holding to both of these doctrines. –  Adrian Keister Jul 31 '12 at 9:52
    
I had in mind, e.g., WCF IX, imagining him, if the analogy between Macbeth and Adam is to hold, in a pre-fall state "had freedom, and power to will and to do that which was good and well pleasing to God; but yet, mutably, so that he might fall from it." –  Ray Jul 31 '12 at 10:32
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But, it sounds I misinterpreted the analogy--it is not between Macbeth and a pre-fall Adam (through whom evil came into the world), but between Macbeth and an unredeemed sinner today –  Ray Jul 31 '12 at 10:34
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Does The Bible Say God Created Evil (Sin)?

KJV: I form the light, and create darkness: I make peace, and create evil: I the LORD do all these [things].

This generates some confusion, because the "evil" God creates does not necessarily match our definition of "evil" (more on this in the next section). We can try reading other translations and commentaries on the verse to gain some insight. A good source for comparison and commentary of individual verses is biblehub.com. The Hebrew word ra` (Strong's H7451), there translated as "evil" in KJV is translated as "calamity" (in NKJV, KJV 2000, ESV, and NASB), "disaster" (in NIV, HCSB, and ISV), "woe" (in RSV) and "bad-times" (in NLT). It is commonly believed to be referring to punishment, and not unrighteousness (see Matthew Henry Commentary for Isaiah 45:5-10).
An example of a similar usage can be found in Genesis 19:19, where ra is again translated as "evil" in KJV but in more modern translations (including ESV, NASB, NIV, and others) the word is often translated as "disaster" (the context being Lot fleeing the impending judgement and destruction of Sodom & Gomorrah).

KJV: Behold now, thy servant hath found grace in thy sight, and thou hast magnified thy mercy, which thou hast shewed unto me in saving my life; and I cannot escape to the mountain, lest some evil[H7451] take me, and I die:
NIV: Your servant has found favor in your eyes, and you have shown great kindness to me in sparing my life. But I can't flee to the mountains; this disaster[H7451] will overtake me, and I'll die.

I hope this points out that "evil" does not equal sin in all cases, especially in older translations/versions of the Bible. And in particular, "evil" does not equal sin in Isaiah 45:7, and the Bible does not say that God created sin.


But If God Created All Things Doesn't That Include Evil?
For a non-doctrinal answer (at least as far as possible), first consider the definition of evil. What is evil? If we are talking about evil as sin, then we can define evil to be unrighteousness.

Evil (by Biblical definition of sin) is unrighteousness, the absence of righteousness, just as darkness is the absence of light. Darkness and evil are not anything, and cannot be created, they are by definition the absence of their "opposites". Therefore, God did not create evil (sin and unrighteousness), evil simply exists wherever God is absent (not followed).

For further reading check: What is the definition of evil?


Why Does God Allow Evil?
The answers to this differ fundamentally based on doctrinal beliefs, mainly dependent on the view of free will.

Assuming that we have free will, evil (unrighteousness) is a byproduct of our free will whenever we choose to do something contrary to the nature of God.
So the question then becomes "why do we have free will?" This is yet another source of doctrinal differences, but one common reason is because when we choose to do God's will, we give honor and glory to God. This honor is all the more meaningful because it was our choice, we were not compelled like a marionette puppet to do it. Furthermore, without the option of unrighteousness and sin, there would be no point to Christ's sacrifice, and no need for forgiveness and redemption.

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Assume: (1) God makes all things; (2) God's purpose in doing anything is for an ultimate good; (3) God wants Man to have free will; (4) God wants Man to be Holy and makes Man Holy; and (5) good and evil, as they exist are relative.

The first assumption is solidly in the Bible. Isaiah 45:7 says that God makes good and he makes evil, "I make all things." Moreover, Deuteronomy 30:15-20 says that God sets before us both good and evil and tells us to choose good so that we may live.

The second assumption is found in the description of God in Exodus 34:5 ("Compansionate and Gracious, Slow to Anger, and Abundant in Kindness and Truth, Preserver of Kindness for a thousand generations, Forgiver of iniquity, willful sin and error, and Who cleanses."

The third assumption, free will, is also established in Deut. 30:15-20. Without free will, the ability to choose right from wrong, we would be hand-puppets and our existence would be pointless.

God wants us to achieve holiness, as it says explicitly at Leviticus 19:2. But, in addition, God makes us holy, as Leviticus 20:8 says.

Good and evil, from Man's perspective, is relative. What is good for the butcher is bad for the cow (i.e. the meat the butcher sells came at the expense of the cow's life). The salvation of the Israelites at the Sea came at the expense of the Egyptians. The marriage of a beautiful couple sometimes comes at the expense of a spurned suitor. And, sometimes, we only reach our loftiest levels of humanity when faced with the most difficult and evil of circumstances.

We can't have free will to choose good without the option of evil. So God's goal for us is that we might reach for holiness by making the right choices; by giving darkness an opening so that we might choose the light. God created in all of us the unlimited capacity to achieve holiness, but also the unlimited capacity to achieve the darkest of evil. Some in every generation have chosen one or the other, and most of us have fallen somewhere in between.

But God has made it so holiness is not out of our reach, despite the temptations He sent the Satan to provide. Psalm 19:8-14 shows us the answer is simply in obeying God's laws, which are "perfect, restoring the soul," something that make "wise the simple," which "rejoice the heart" and "enlighten the eyes." Moreover, observance of the Law is "not too difficult" (see Deut. 30:11). As King David said at Ps. 19:13-14, if God can overlook our unintentional sins, and help us keep away from intentional sins, helping us to not let them have dominion over us, "then shall I be faultless, and I shall be clear from great transgressions."

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The Mormon church teaches the concept of opposition: in order for good to be appreciated there must exist evil, in order for salad to taste good there must be junk food etc. A very good description can be found in "Confessions of a Sociopath" by M.E. Thomas (despite the title and author)

http://www.lds.org/search?lang=eng&query=opposition

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Everything that has an opposite cannot exist without having one (except for God of course). God, by His very nature is good, in fact Goodness itself!

So, if one of his creatures were to do something against his nature or wishes, such as to commit a sin, they/it would become evil.

In other words, anything that is not good or or is against good, is evil. By the existence of good, evil has always existed and could always be accessed or embodied by an entity.

Think of it as God, being the good being He is, didn't directly create evil, but was a result of His own being. (Without evil, one cannot be good!)

I hope this answers your question.

NOTE: This though is referred to as 'the problem of evil'.

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(evil is lack of, or opposition of good) –  SuperCookie47 Dec 7 '13 at 20:07
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Welcome to the site! This next has nothing to do with the quality of your answer, it's just standard to help new visitors avoid misunderstanding the site (as I did at first.) As a new visitor, I'd recommend checking out the following two posts, which are meant to help newcomers "learn the ropes": the help page and How we are different than other sites? –  David Stratton Dec 7 '13 at 20:31
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In order for there to be good, there has to be evil, or good would not be good, it would simply be a state of being since there would be nothing to compare it to.

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Welcome to the site! This next has nothing to do with the quality of your answer, it's just standard to help new visitors avoid misunderstanding the site (as I did at first.) As a new visitor, I'd recommend checking out the following two posts, which are meant to help newcomers "learn the ropes": the help page and How we are different than other sites? –  David Stratton Dec 7 '13 at 4:15
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How can God create evil and remain righteous and holy? God uses the wicked for his purposes. The evil spirit of the Lord is Satan.

The devil was a murderer from the beginning, Genesis 4;8 and I John 3;12. and the father of lies John 8;44.

I John 3;8, I Corinthians 5;5, and Revelation 9;1.

Other passages where God uses evil spirits; Job 1;18-19, Job 2;6, I Samuel 18;10. I Kings 22;22, and Psalms 78;49. Evil spirits are also envy, rebellion, pride, jealousy , etc.

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