Question: "What does it mean that even the demons believe (James 2:19)?"
Answer: James 2:14 begins a discussion of faith without works and includes a vivid point by James that even the demons believe and tremble (James 2:19). The “faith” of demons is useless, even though they tremble at what they know to be true. People who say they “believe” in God while showing no evidence of faith have a level of “belief” similar to that of demons.
James illustrates the usefulness of works for showing mercy (James 2:13) by hypothetically asking what use it is to have faith without works and questioning rhetorically whether that faith can deliver a person (James 2:14). If the faith is not accompanied by works, it cannot deliver a person from his need, as in the case of a brother or sister who needs food (James 2:15). If the one who has faith does not meet the need, the people with the need remain in need (James 2:16). That faith is dead by itself—it is not useful for delivering someone from a need (James 2:17).
James offers another hypothetical in James 2:18: someone might suggest that people show their faith in different ways (some with works and some without). James disputes that hypothetical, reminding his readers that faith without works is of no use (James 2:20). Before he makes that assertion of the uselessness of faith without works, James addresses the hypothetical person in his example (evident by his use of the singular pronoun, though when he addresses his readers, he uses the plural). James challenges those who believe God is one: even the demons believe that much—and they tremble (James 2:19). The demons aren’t changing their behavior—they are not meeting needs or having mercy on others—despite their knowledge of who God is.
In pointing out that even demons believe certain things about God, James implies that one who has faith but isn’t showing it by his works is in a practical sense of no more usefulness than those demons. One’s faith doesn’t deliver others from need, the works do (James 2:16). One’s faith doesn’t provide mercy to someone, the works do (James 2:13). James further reminds his readers, whom he has already identified as brothers who have faith in Jesus Christ (James 2:1), that Abraham was justified by his works when he offered Isaac as a sacrifice (James 2:21) and that, when Abraham took that action, the Scripture was fulfilled that said Abraham had been justified by belief in God (James 2:23, quoting Genesis 15:6).
James is keenly aware that Abraham had been justified by faith (in Genesis 15:6) more than a decade before he offered Isaac (in Genesis 22). Abraham had been declared righteous by God long before that act of sacrifice, and Paul affirms that Abraham was justified by his faith (Romans 3:28—5:1) and not by works. So, James is clearly talking about a different kind of justification; when he refers to the fact that the demons believe and tremble (James 2:19), James is not talking about justification before God (or God’s declaring the person righteous). Instead, James is talking about an evident or useful righteousness that people can see, a righteousness that shows mercy (James 2:13) and meets needs (James 2:16). James is talking about justification before people—suggesting that one cannot show faith (to people) without good works (James 2:18).
James adds that it would be foolish to think one could demonstrate faith without works (James 2:20). If James is referring to justification by God rather than justification before people, then he and Paul are directly in conflict with each other (compare James 2:24 and Romans 3:28). Paul’s context is considering how one becomes righteous before God (Romans 3:28), and James discusses how one puts that to practical use. We show our faith to other people by showing mercy (James 2:13) and meeting needs (James 2:16).
The demons believe and tremble (James 2:19), yet they don’t show people mercy or meet needs—their knowledge of God doesn’t result in changed behavior. James expects more from those who are brothers and have believed in Jesus Christ (James 2:1).