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"Children of Israel" or "Sons of God" in Deuteronomy 32:8?

"When the most High divided to the nations their inheritance, when he separated the sons of Adam, he set the bounds of the people according to the number of the children of Israel. For the LORD'S portion is his people; Jacob is the lot of his inheritance."  (Deuteronomy 32:8-9, KJV)

The KJV follows the Masoretic text which says, "children of Israel".  Agreeing with the KJV are the NKJV, NIV and the NASB ("sons of Israel").  The term, "the number of the children of Israel (מספר בני ישראל)" does not refer to the 12 sons of Jacob.  If the 12 sons of Jacob were meant, the term would be "the number of the tribes of the children of Israel" as seen in Joshua 4:5, 8.  During Moses' time, "the number of the children of Israel" was the entire population of Israelites who had escaped Egypt.  In Hosea 1:10, the same term, "the number of the children of Israel (מספר בני ישראל)" refers to the innumerable future population of the Israelites, not the 12 sons of Jacob.  So any critic who argues against the Masoretic reading on the assumption that it refers to the number "12" is beginning with the wrong premise.

To paraphrase, the Masoretic reading says that God set the borders of the nations in the Middle East by keeping in mind the space required for the population of the Israelites ("the number of the children of Israel").  This interpretation is supported by Wesley's Notes:

"32 Gen 11:1 - 9. When he separated - Divided them in their languages and habitations according to their families. He set the bounds - That is, he disposed of the several lands and limits of the people so as to reserve a sufficient place for the great numbers of the people of Israel. And therefore he so guided the hearts of several people, that the posterity of Canaan, which was accursed of God, and devoted to ruin, should be seated in that country which God intended for the children of Israel, that so when their iniquities were ripe, they might be rooted out, and the Israelites come in their stead." (Wesley's Notes)

The Masoretic reading makes perfect sense and does not need to be change.  The ESV and NLT, however, follow "sons of God" as found in the Dead Sea Scrolls.  The  Septuagint has "ἀγγέλων θεοῦ" (angels of God).  Critics who make this change most often assume that "the number of the children of Israel" refers to the number "12" and see that such a small number is not congruent with the number of nations in the Table of Nations (Genesis 10).  These critics choose the reading of "sons of God" as it would support a higher number than 12, such as 70.  These critics suppose that the original reading was "sons of God" and the Jews changed it to "sons of Israel" because of a religious bias.  However, a case could be made for a religious or cultural bias on the part of Gentiles or heretical sects with the reading of "sons of God".  Commentator Albert Barnes says: 

"Some texts of the Greek version have "according to the number of the Angels of God;" following apparently not a different reading, but the Jewish notion that the nations of the earth are seventy in number (compare Genesis 10:1 note), and that each has its own guardian Angel (compare Ecclus. 17:17). This was possibly suggested by an apprehension that the literal rendering might prove invidious to the many Gentiles who would read the Greek version." (Barnes' Notes on the Bible, Deuteronomy 32:8)

As for the Dead Sea Scrolls, they were created by the Essenes.  This sect held a curious devotion to angels.  Josephus, describing what a convert to the sect had to observe, writes: "Moreover, he swears to communicate their doctrines to no one any otherwise than as he received them himself; that he will abstain from robbery, and will equally preserve the books belonging to their sect, and the means of the angels." (Wars of the Jews, Book 2, chapter 7).  The phrase "sons of God" in the Dead Sea Scrolls is a term for angels (Job 1:6).  It is not surprising that an Essene text prefers a reference to angels rather than to the children of Israel.  The Essenes, being an isolated sect, did not care so much for the other Israelites.