Thesis: Psalm 2:7 actually features 3 covenant perspectives. The immediate Davidic Covenant which will eventually culminate and find fulfillment in the New. The Covenant of Redemption, which plays itself out in the New. And finally, the New Covenant, inaugurated in Jesus' resurrection. Each of these Covenants (Davidic, Redemption, New) feature an aspect of Jesus' Sonship according to their respective covenant (Davidic, Eternal, "In Power")
Before I begin, I want to note that I might later make many edits to this because I have a lot of notes on Ps. 2 and Proverbs 8 as it relates to Eternal Generation that I might decide to later include. This triple perspective is recognized by J.V. Fesko in this video starting around 44:50-46:50 https://youtu.be/zMH2EnzbW5o I have long wanted to write a defense of the eternal generation of the Son from Psalm 2:7, as I believe there is much to be said here regarding that interpretation. The best treatment of this is in "Retrieving Eternal Generation" in the chapter on Psalm 2 by Madison Pierce. I have notes on that chapter and on Beale and Carson's book regarding the use of Psalm 2 in Acts 13 that I've long wanted to bring together. To begin, I will not be defending the interpretation that Psalm 2 at least refers to the Davidic covenant because it seems to me that everyone would grant this. Moving on, I would direct you again to Madison Pierce's chapter in REG for a fuller defense of the eternal generation view of Ps. 2, in arguing that "Today" should be understood as an eternal "today". The logic in Hebrews is that the Son's Davidic Sonship is grounded in His eternal ontological Sonship. As Pierce says, "You are my Son; today I have begotten you' is not just a claim about Jesus reaching an exalted status. It is a declaration of his eternal relationship with the Father that is always in effect" (RTG, pg. 131). Keyword "just". Most commentators treat these 2 interpretations (either Ps. 2 is about Jesus' Davidic Sonship or it is about Jesus' Eternal Sonship) as mutually exclusive. This is short-sighted and does injustice to the logic of the author of Hebrews who sees the Davidic Sonship as being grounded in the Eternal Sonship; The Eternal Son of God became the Davidic Son of God (I do not yet own it, but I have heard R.B. Jamieson's book, "The Paradox of Sonship" is good on this point). [see too, the last 2 paragraphs of James Hamilton, "Psalms" pg. 103, and note that 2 Samuel 7:12 indicates that the promised king is eternal, which David would have understood when he wrote the psalm]. To understand the author of Hebrews as intending to prove mere Davidic kingship from the texts he uses completely misses his entire point. From Hebrews 1:2-13, all references to the Son are intended to show his eternal Sonship (He is the "radiance of His glory"…has been begotten by God…Is worshipped…Is called God…Has an eternal throne…Created the world…Sits at God's right hand [as is only fitting for the God-man]). It simply will not do to limit Hebrews 1:2-13 to Davidic Sonship without also encompassing Divine Ontological Sonship. This does not fit the author's argument. The entire point of the author of Hebrews is to prove that Christ is God; he is superior even to angels. Arguing that Christ is the Davidic king would not accomplish this because a merely human king cannot be said to be greater than angels. The radical "betterness of Christ" (as is so often summarized as the message of Hebrews) would be completely lost were the author arguing that Christ is simply another Davidic king. I want to one consideration in favor of the eternal generation argument that Pierce does not mention in her chapter. There is a very strong intertextual connection between Psalm 2 and another place that strongly supports the Eternal Begetting interpretation… And that place, of course, is Proverbs 8. Proverbs 8 is, in my opinion, the true "crux interpretum" (to borrow D.A. Carson's phrase on John 5:26) for eternal generation. The chapter in REG is a good reference for more on this crucial passage. Much has been written on the Second Temple view of Wisdom, and indeed the New Testament writers themselves used the imagery of Wisdom to describe Christ (for example, we already saw the author of Hebrews call him the "radiance of His glory and the exact imprint of His nature, and upholds all things by the word of His power"). The Moody Handbook of Messianic Prophecy actually argues for a connection between Proverbs 8 and Proverbs 30:4, which would identify Wisdom as God's Son, but this has already been done in Jewish literature anyways. I have written before on this in connection to John's prologue here:
But the intertextual connection that I mentioned is this: Psalm 2 says, "I have installed my King upon Zion" and Proverbs 8 reads, "From everlasting I was installed" The Hebrew word for "installed" here is only used twice in the entire Bible…these two passages being the only instances. It is amazing canon-wide intertextual references like these that cause you to realize the Bible must have been written by a divine author. We can even see the Spirit's guidance in the Church in bringing the fathers to Proverbs 8 and Psalm 2 in order to defend eternal generation, when one of the strongest links between the two (a word only used twice) already exists. So, how does this relate to the Covenant of Redemption? Well, in the same way Christ is understood to be the eternal Son by the citation of Psalm 2 in Hebrews 1:5, the "decree" of Psalm 7, when it is said, "I will surely tell of the decree of Yahweh" should be understood as an eternal decree, as the Son is also understood to be eternally begotten (or "installed from everlasting") on an eternal "today". The "decree" of Psalm 2:7 should be understood as a covenant. To quote from an RTS journal, The first sentence is found at the beginning of verse 7, “I will tell of the decree.” The significant word in this phrase is “decree,” which is also frequently translated “statute” in the Old Testament (hoq). This word is regularly identified with the idea of covenant, and, as we saw above, it is oftentimes translated as covenant. Psalm 50:16 places “statute” (hoq) and “covenant” in parallel, which indicates that there is at least a great deal of overlap between these two terms if not outright synonymity. Joshua 24:25 and 2 Kings 17:15 teach us that God’s statutes and covenant are so closely identified that keeping his statutes is tantamount to keeping his covenant and despising his statutes is tantamount to despising his covenant (see also 1 Kings 9:4-5; 2 Chron. 34:31; Neh. 10:29). But perhaps the clearest passage of all in this regard is Psalm 105:8-10 (which is also found in 2 Chron. 16:15-17). Here, “covenant,” “sworn promise,” and “statute” or “decree” are all used in parallel. The “covenant that [God] made with Abraham” is the same thing as “his sworn promise to Isaac,” which “he confirmed to Jacob as a statute, to Israel as an everlasting covenant."…Peter Craigie concludes that “[t]he ‘decree’ is a document, given to the king during the coronation ceremony (cf. 2 Kgs 11:12); it is his personal covenant document, renewing God’s covenant commitment to the dynasty of David.” (https://journal.rts.edu/article/the-covenant-of-redemption/) Likewise, another verse, namely, Psalm 110, a related Messianic Psalm, we have the same covenental idea, back to RTS, [1] The second passage that we will consider here is Psalm 110. This psalm, which was written by David, is explicitly Messianic. The opening verse tells us quite plainly that David is writing about someone greater than himself, someone he calls “my Lord” (Adon/Adonai). This someone will sit at the right hand of God (v. 1) and will be both king (vv. 2-3) and priest (v. 4). He will not only be greater than David, but he will also be greater than the angels and the Levitical priesthood as well, as Hebrews 1:13; 5:5-6; and 7:17-22 make clear. But what is far more significant for us is that, as Calvin said, we have “the testimony of Christ that this psalm was penned in reference to himself,” which ought to remove any lingering doubts we might have about it (Matt. 22:41-45). In this psalm there are at least two interesting indicators that point in the direction of the covenant of redemption. The first is the direct address that Yahweh makes to David’s “Lord” in verse 1, and the second is the oath that Yahweh takes in reference to the same figure in verse 4. In regard to the first, we can say that the address looks ahead to Christ’s incarnation and earthly ministry when, in the words of Calvin, he will be “invested with supreme dominion.” We know that the Son, as God, already possesses supreme dominion in and of himself; he does not need to be invested with it. But when he humbles himself, takes on human flesh, and places himself in submission to earthly authorities and principalities and to all his Father’s will, he does need to be invested with dominion so that all may know that he really is the Son. These comments in verse 1 would, therefore, seem to be reflective of an agreement or arrangement within the Trinity whereby the Son agreed to humble himself and place himself in submission, and the Father agreed to crown the incarnate Son king and to invest him with supreme dominion. Secondly, we can say that the language of covenant is reflected in the way that Christ is described as being appointed priest after the order of Melchizedek. The fact that Yahweh swears an oath to do this clearly points to the existence of a covenant relationship. Meredith Kline has argued that in the Bible, “[t]he covenantal commitment is characteristically expressed by an oath sworn in the solemnities of covenant ratification.” He has pointed to Genesis 15 and Hebrews 6:17-18 and 7:20-22, in particular, to support his claim. Palmer Robertson has further argued that this oath does not necessarily have to be part of a “formal oath-taking process.” Citing Psalm 89:3, 34-35, and 105:8-10 and a whole host of other Scripture passages, Robertson declares that “‘[o]ath’ so adequately captures the relationship achieved by ‘covenant’ that the terms may be interchanged.” His conclusion is that the Bible teaches not merely that a covenant contains an oath but that it actually is an oath. If Kline and Robertson are right, Psalm 110:4 is plainly teaching that there is a covenant existing between Yahweh and Christ, one in which the latter is appointed as a priest who will intercede on behalf of God’s people forevermore. Psalm 110 is cited in Hebrews 7:20-22, And inasmuch as it was not without an oath (for they indeed became priests without an oath, but He with an oath through the One who said to Him, “The Lord has sworn And will not change His mind, ‘You are a priest forever’”); so much more Jesus also has become the guarantee of a better covenant. Notice how he connects the "oath" to the fact that "Jesus also became the guarantee of a better covenant". In other words, the New Covenant is grounded in the eternal Covenant of Redemption. Another way to say this is that the Covenant of Redemption (based on the eternal "oath"/covenant) is played out in time in the New Covenant, of which Jesus has "become the guarantee of". RTS again, Hebrews 7:20-22, moreover, helps us to see that the intra-Trinitarian covenant of Psalm 110:4 is a pre-temporal covenant. After telling us that Jesus is unique, insofar as he is made priest with an oath, the author of Hebrews cites Psalm 110:4 and concludes by saying: “This makes Jesus the guarantor of a better covenant” (v. 22, emphasis added). In other words, the point is that the oath (of Ps. 110:4) is what has made Jesus the guarantor of the covenant of grace. Now, a guarantor is one that guarantees that the promises of the covenant will in fact be carried out. If Jesus is such a guarantor, then this means that the certainty of the covenant of grace is based upon him and his role as guarantor. But this role is a result of the oath of Psalm 110:4, which means that there is an oath undergirding or guaranteeing the covenant of grace—an oath between Yahweh and Adonai or between Father and Son. If Robertson is right that covenant and oath are used interchangeably in Scripture, then Psalm 110 and Hebrews 7 are teaching that there is a covenant relationship between Father and Son which is undergirding or guaranteeing the covenant of grace, which is precisely what Samuel Rutherford said in the mid-seventeenth century: “the Covenant of Suretyship [i.e., redemption] is the cause of the stability and firmnesse of the Covenant of Grace.” This covenant relationship must be prior to the covenant of grace not only in execution but even in the stage of conception within the mind of God; otherwise it could not function as the basis for it. Thus the intra-Trinitarian covenant of Psalm 110:4 and Hebrews 7 must be pre-temporal.
Finally, the New Covenant perspective is, of course, found in the fact that that's where Psalm 2 is fulfilled. Christ has begun his reign in an already-not-yet sense, and the nations have become His inheritance in the Church. So, we see that Psalm 2 has reference to the Davidic Covenant (and therefore to Jesus' Davidic Sonship), which as we know from a biblical theological perspective will ultimately culminate and find its fulfillment in the New Covenant. Yet, we also see that Psalm 2 has reference to the Covenant of Redemption (and therefore to Jesus' eternal Sonship), which will play itself out in history in the form of the New Covenant [2]. With that said, we can now begin to understand Acts 13 and Romans 1:4 use of Psalm 2, which takes Jesus' resurrection as His begotteness (Acts 13:33). The idea here is that, as Romans 1:4, says, by His resurrection, Jesus was "declared to be the Son of God in power", which of course assumes that He is the Son of God already (both in a Davidic and Eternal sense as we have seen), but the focus is on the inauguration of the New Covenant through His resurrection. By being raised from the dead, Jesus is no longer a servant, but inaugurates the New Covenant and therefore now reigns as King in power and therefore His resurrection was the declaration of that and the beginning of a new era in Jesus' life in which He reigns supreme as the Son of God, having brought in the inauguration of the New Covenant. So we see that Psalm 2 also ultimately has reference to the inaugurated phase of the New Covenant, which both the Davidic Covenant and the Covenant of Redemption were leading up to and therefore in connection to the New Covenant, Jesus is "the Son of God in power". His reign has begun. The writing of Psalm 2:7 involved David overhearing the eternal Sonship of Christ [3] and expressing this typologically within his own time (with the Davidic King as the "Son of God"), which would have ultimate fulfillment in the true and eternal Son of God becoming the Davidic Son of God and the beginning His reign in power, and for that reason, Psalm 2:7 has reference to all 3 of these covenants and 3 senses of sonship.
[1] One could argue (rightly, I believe), as Peter Gentry does, that Psalm 110 refers to the Davidic Covenant:
But what about Psalm 110:4-6? Where did Yahweh swear this? These ideas can be derived from two sources: (1) in 2 Samuel 7:14-15 Yahweh swears to give David a greater son who is viewed in Adamic terms. I argued for this in Kingdom through Covenant but I did not realize the implications of my own arguments. If the greater son of David is fulfilling an Adamic role, then this greater son must be both king and priest, because Adam was both king and priest. A recent study of the plot structure traced through the Book of Samuel adds further support by showing that a king-priest is expected as 1 Samuel 2:35 is unfolded throughout the narrative as a whole.39 (2) But where do we find in Scripture the model for a king-priest who will crush the power of other earthly kings and inherit the nations? Surely this is exactly the story of Genesis 14. And when one looks at Psalm 110:4-6 all of these ideas are derived specifically from “the Battle of the Four Kings against the Five and the Victory of Melchizedek.” Please note, in the battle of the Four Kings against the Five, the victory is not the victory of Abraham. It is the victory of Melchizedek. The author of Hebrews helps us grasp this: “Consider how great this man was!” (https://sbts-wordpress-uploads.s3.amazonaws.com/equip/uploads/2020/02/SBJT-23.2-A-Prelim-Evaluation-Critique-of-Prosopological-Exegesis-Gentry-1.pdf)
Yet this does not rule out the verse also referring to the Covenant of Redemption. Using the same contemplative canon-wide exegetical approach as we do with Psalm 2 not only being a declaration of Davidic Sonship upon Christ but also of eternal, ontological Sonship, we can see that though the Davidic Covenant is the historical circumstance that Christ will come to fulfill, his mission is grounded in the eternal promise and declaration of God to Him before the world began. Psalm 2 is about the Davidic Covenant to be sure, but it is typological of a greater David and therefore a greater covenant in which this eternal kings obeys. With all my cards on the table, I have to admit I have had my doubts about how exactly to formulate the Covenant of Redemption, however, I still believe it to be the best explanation of what we have in Scripture, and I do not wish to do anything new and thus reduce the Covenant of Redemption to an "early phase of the New Covenant", (similar to the early Vos) thus making all references to it not references to a separate Covenant between the Father and Son, but rather references to a specific phase of the New Covenant where Christ completes it as a covenant of works, or even simply reduce it to the Davidic Covenant which Christ must fulfill to inaugurate the New Covenant, but rather I want to stand in-line with great men who have come before me, as I do not trust myself over them and thus, I believe the approach I have taken here is the correct one. The Davidic Covenant is an earthly picture of the Covenant of Redemption.
The Covenant of Redemption can be proven typologically by looking at the progression of Adamic figures under a Covenant of Works in which they must render obedience to God for blessing or for punishment (Adam, Abraham [see too Genesis 15:11 where Abraham typifies Israel driving the nations away in covenantal obedience to gain the land cf. Targum Jonathan], Israel, David); it is absolutely unthinkable that the last Adam, whom all these types and covenants pointed to would not also be under such a covenant.
[2] After, all, as Sam Renihan writes, "The reward promised to the Son if He faithfully and perfectly completed the commitments and obligations of the covenant [of Redemption] was resurrection and exaltation (The Mystery of Christ, 156), he then cites Isaiah 53:10-12 to prove his point. So we see the inauguration of the New Covenant is the reward for the completion of the CoR. This is the logic behind the statement that Christ was "raised for our justification". His resurrection vindicated the fact that He lived a perfect life of obedience, and thus that provides the meritorious grounds for his resurrection (as eternal life is the covenantal reward for perfect obedience; if you do the law, you will live). Due to Jesus' perfect obedience to the Father in the Covenant of Redemption, the Father "satisfied him with a long life" by prolonging his days, thus reversing the curse of Gen 2:17. Christ's resurrection vindicates his righteousness, which becomes ours in him (Rom 4:25). The pronouncement of "righteous" in Jesus' resurrection becomes ours because we are united to Him. Thus we are justified through Him, because we too receive the same verdict that he received. [The preceding thoughts came to me while reading Brandon Crowe's "Why Did Jesus Live a Perfect Life" pg. 83 and reflecting on resurrection (eternal life) as the reward for obedience in contrast to the curse of Genesis of death for disobedience. My interpretation of Romans 4:25 was confirmed later that day when I listened to this: https://www.sermonaudio.com/solo/gcbcnj/sermons/523102123496/ ] The Covenant of Redemption is, fundamentally, Christ's Covenant of Works, through which we are justified. This is presupposed in the Romans 5 analogy between Adam's failed Covenant of Works and Christ's kept Covenant of Works (Covenant of Redemption) through which the New Covenant is inaugurated.
[3] I do not here mean to suggest that David likely fully knew of this, but this is what God was intending through him.
I finally wish to add that I believe the dual nature of Christ gives us hermeneutical justification to do such things as I have done here. Often times in Scripture a single verse will take on a dual meaning in relation to Christ, applying both to his economic and ontological Sonships in different ways. For example, his transfiguration prefigures the glorification of all Christians (as this applies to Christ's human nature), however, it also evokes overtones of theophany and divine light (as this applies to Christ's divine nature). It is good to see this as the rule/norm with Christological interpretation rather than the exception.