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Panentheism has two distinct streams of formation, the emanationism of the ancients, and the 19th century effort of Karl Christian Friedrich Krause to reconcile the theistic God of the Bible with the version of pantheism which had grown popular in the 18th Century.
The ancient Greeks (particularly Pythagoras and later Plotinus) conceived of the universe as a natural and in fact inevitable construct of energy poured out by the One (the primal unity, God as a being that encompassed the world). Although God remained transcendent from the universe, it was also the progenitor of its material.
Plotinus, in particular, envisioned God as having released waves of emanations, with each wave creating a different level of reality, without God even being aware of it (or caring about it). When the waves began to return to God due to the irresistable attraction toward the restoration of oneness, God's awareness was piqued. This led God to reveal the missing part of itself to those parts which had sloughed off in the emanations.
This conception was rejected by Christianity and largely surpressed after that religion became dominant in Europe. It was considered by a minority of Islamic scholars such as Abû Nasr al-Fârâbi, a tenth-century Turkish-born member of the mystic Faylasuf branch of Islam. Al-Fârâbi and his followers studied the works of Plotinus, along with reconcilable concepts from Plato and Aristotle. However, as with Christianity, Islam was uneasy with the concept of an emanated world that was part of God, ultimately rejecting this thought in favor of a pure theism.
Panentheism, conceptually, remained undeveloped until the 1800s, when pantheism had become popular and threatened to undermine the role of Christianity in the West. In 1828, Krause coined the word, "Panentheismus" (German for panentheism) to explain how it could be true that all things are part of God, while at the same time God remained transcendant, above and apart from the world. Although Jews and Christians may be unaware of the philosophical origin of the term, it now pervades the religious thought of both faiths.
In the 1960s, theologian Charles Hartshorne, in developing his process theology, scrupulously categorized and examined the theological positions in existence at the time. He explicitly rejected pantheism, deism, and pandeism in favor of a panentheistic God whose characteristics included "absolute perfection in some respects, relative perfection in all others" or "AR", writing in Man's Vision of God and the Logic of Theism that this theory "is able consistently to embrace all that is positive in either deism or pandeism", concluding that "panentheistic doctrine contains all of deism and pandeism except their arbitrary negations". Hartshorne, a disciple of Alfred North Whitehead, laid out with fairly mathematical precision what he believed to be an adequate philosophical proof that this was the nature of God.
In the 1990s, a concept of panendeism was developed, which combines panentheism with deism, It asserts that the universe is indeed one part of a God which also has a transcendent apect which is capable of intervening in the universe, but that this transcendent aspect nevertheless does not intervene.

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