Childs has a nice section in Exodus (p. 299-302) where he wrestles with this question. Below are a few of his statements. I’m not going to comment on it much, because I’m still digesting it myself.
First, Childs says there are two basic approaches to this question, neither of which he likes. The first way is the “supernaturalistic” viewpoint, which controls and corrects extra-biblical evidence. Childs says this position wants to use extra-biblical evidence, but ultimately doesn’t let the evidence speak for itself. The second way is that of rationalism, which “represents the opposite extreme.” “It seeks to determine the truth of the biblical testimony on the basis of critical evaluation according to rational criteria, based on past human experience.” This position eliminates the basic theological issues of the Scripture by scientifically and rationalistically explaining away everything in Scripture. (Side: later Childs says one example of rationalizing an OT story is explaining the water from the rock in Ex 17 as a parallel to modern examples of water breaking through the crust of rock in the desert.)
Childs: “In my judgment, a correct understanding of biblical theology in the context of the canon allows one to break out of this old impasse. First of all, the theological concept of canon is a confession.” The canon “serves a unique function in the relation between God and his people…. In other words, scripture is not simply one means among several others of testifying to a unique self-disclosure of God in Jesus Christ. To take the concept of the canon seriously is to assign to scripture a normative role and to refuse to submit the truth of its testimony to criteria of human reason.”
Now Childs gives a however: “However, the canon lays no claim to universal knowledge…” “The integrity of the canon is maintained without calling into question legitimate areas in which the judgment of human reason is appropriate.” I once heard an OT scholar say that extra-biblical evidence can be an occasion for reinterpretation, but not the grounds for it. I think this is sort of what Childs is saying, if I “get” him here.
He closes this section like this: “The biblical exegete is forced to hear testimony from inside and outside the community of faith because he lives in both worlds (earlier he said that ‘both worlds’ speak the same language, share the same thought-patterns, and share similar experiences of daily life). He dare not destroy the canonical witness by forcing it into the mold of the ‘old age,’ nor dare he construct out of the canonical witness a world of myth safely relegated to the distant past. Rather, he confesses his participation in the community of faith by ‘searching the scriptures.’ He seeks to share the bread of life with the church through the testimony of scripture. He remains open in anticipation to those moments when the Spirit of God resolves the tension and bridges the gap between faith and history.”