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 Taxation
Finance Act 2021
Twenty-seventh edition

Alan Melville
FCA, BSc, Cert. Ed.

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan

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 PEARSON EDUCATION LIMITED
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Tel: +44 (0)1279 623623
Web: www.pearson.com/uk

First published 1995 (print)

Twenty-seventh edition published 2022 (print and electronic)
© Pearson Professional Limited 1995, 1996 (print)
© Financial Times Professional Limited 1997, 1998 (print)
© Pearson Education Limited 1999, 2010 (print)
© Pearson Education Limited 2011, 2022 (print and electronic)
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ISBN: 978-1-292-40672-5 (print)
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978-1-292-40671-8 (ePub)

10 9 8 7 6 5 4 3 2 1
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Print edition printed by Ashford Colour Press Ltd, Gosport

NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

F01_Taxation_406725.indd 4 15/06/2021 14:12

 Contents

Preface ix Eligible interest payments 54

Acknowledgements x Annual payments 55
Summary of tax data xi Gifts of shares or property to charity 55
Payments which are tax reducers 56
Part 1 Income Tax and National Insurance Maintenance payments 56
Loans used to purchase a life annuity 57
1 Introduction to the UK tax system 3 Gifts of pre-eminent property to
UK taxes 3 the nation 57
Sources of tax law 4 Gift Aid 58
The tax year 6 5 Income from property 62
Structure of HM Revenue and Customs 6 Definition of property income 62
Administration of the tax system 7 Basis of assessment and allowable
Self Assessment 7 expenditure 63
Appeals 11 Capital expenditure 64
Tax evasion and tax avoidance 12 Losses 66
Making Tax Digital 14 Lease premiums 67
The HMRC Charter 14 "Rent-a-room" relief 69
2 Introduction to income tax 16 Furnished holiday lettings (FHL) 69
Taxable persons 16 6 Income from savings and investments 74
Classification of income 17 Interest received 74
Exempt income 18 Dividends received 76
Structure of an income tax computation 19 Tax-efficient investments 76
Married couples and civil partners 20 Individual Savings Accounts 77
Rates of income tax for 2021-22 20 Enterprise Investment Scheme 79
Income taxed at source 23 Venture Capital Trusts 80
Savings income 24 Child Trust Funds 81
Dividend income 31 Income from trusts and settlements 82
Allocation of the personal allowance 34 Miscellaneous income 85
3 Personal allowances 38 7 Income from employment (1) 88
Personal allowances for 2021-22 38 Employment and self-employment 88
The personal allowance 39 Basis of assessment 91
Blind person's allowance 42 Employment income 91
Tax reducers 42 Non-taxable employment income 92
Married couple's allowance 42 Deductible expenses 94
4 Payments and gifts eligible Termination payments 97
for tax relief 49 The PAYE system 99
Payments and gifts deductible from Construction industry scheme 103
total income 49 Employee incentive schemes 104

v
Contents

8 Income from employment (2) 109 Early trade losses relief 185
Benefits in kind 109 Terminal trade loss relief 187
Living accommodation 111 Post-cessation trade relief 189
Cars provided for private use 114 Transfer of a business to a company 189
Beneficial loans 118 Losses on shares in unlisted trading
Salary sacrifice 120 companies 189
Limit on income tax reliefs 190
9 Income from self-employment:
Computation of income 122 13 Income from self-employment:
The badges of trade 122 Partnerships 193
The calculation of trading profits 124 Principles of partnership taxation 193
Deductibility of expenditure 125 Notional profits and losses 196
Disallowed expenditure 125 Change in partnership composition 197
Allowable expenditure 128 Non-trading income 199
Adjustments relating to income 130 Trading losses 200
Trading income allowance 131 14 Pension contributions 205
Cash basis and simplified expenses 132 Registered pension schemes 205
10 Income from self-employment: Tax relief for contributions
Basis periods 138 by scheme members 207
The current year basis 138 Tax relief for contributions
Commencement of trade 139 by employers 210
Cessation of trade 142 Annual allowance charge 212
Change of accounting date 144 Lifetime allowance charge 215
Averaging of trading profits for 15 Payment of income tax, interest
farmers and creative artists 149 and penalties 220
11 Income from self-employment: Payment of income tax 220
Capital allowances 155 Late payment penalties 223
Eligible expenditure 155 Interest on overdue income tax 224
Chargeable periods 155 Interest on overpaid income tax 225
Plant and machinery 156 Penalties 225
Capital allowances on plant and 16 National Insurance contributions 230
machinery 158 Class 1 230
Writing down allowance 159 Class 1A 236
Annual investment allowance 162 Class 1B 236
First year allowance 165 Class 2 237
Balancing allowances and charges 167 Class 3 237
Non-pooled assets 167 Class 4 238
Allowances on cessation of trade 171 Annual maximum contributions 239
Structures and buildings allowances 172
Miscellaneous capital allowances 173 Review questions (Set A) 243

12 Income from self-employment: Part 2 Capital Gains Tax

Trading losses 178
Relief for trading losses 178 17 Introduction to capital gains tax 253
Carry-forward trade loss relief 179 Chargeable persons 253
Trade loss relief against total income 181 Chargeable assets 254
Temporary extension of s64 relief 184 Chargeable disposals 255

vi
 Contents

Basis of assessment 256 Part 3 Corporation Tax

Rates of CGT 257
Relief for capital losses 259 23 Introduction to corporation tax 343
Relief for trading losses 261 Scope of corporation tax 343
Administration of CGT 263 Accounting periods 344
18 Computation of gains and losses 267 Taxable total profits 345
Layout of a CGT computation 267 Trading income 346
Disposal value 268 Income from property 351
Allowable expenditure 268 Income from non-trading loans 351
Part disposals 270 Dividends received 353
Assets with negligible value 272 Relief for charitable donations 353
Assets held on 31 March 1982 273 Loan relationships 354
Long periods of account 358
19 Chattels and wasting assets 277 Research and development tax relief 360
The chattels exemption 277 Intangible fixed assets 361
Chattels disposed of at a loss 279
Part disposals of chattels 279 24 Corporate chargeable gains 365
Wasting chattels 282 Chargeable disposals and assets 365
Wasting assets 283 Basis of assessment 366
Leases 285 Computation of gains and losses 366
Indexation allowance 367
20 Shares and securities 294 Assets held on 31 March 1982 370
The share matching rules 294 The rebasing election 373
The Section 104 holding 296 Assets acquired before 6 April 1965 373
Bonus issues 298 Disposals of shares or securities 374
Rights issues 300
Capital distributions 302 25 Computation and payment of
Takeovers 304 the corporation tax liability 387
Gilts and qualifying corporate bonds 306 Corporation tax financial years 387
Rates of corporation tax 388
21 Principal private residence 310 Due date of payment 389
Principal private residence 310 Accounting for income tax deducted
Partial exemption 311 at source 392
Deemed residence 312 Shadow ACT 392
Letting relief 314 Self Assessment 393
Business use 316 Interest on underpaid and overpaid
22 CGT reliefs 319 corporation tax 394
Damaged assets 319 Penalties 396
Destroyed assets 322 Rates of corporation tax from FY2023 397
Replacement of business assets 323 26 Corporation tax losses 401
Gift of business assets 326 Relief for trading losses 401
Transfer of a business to a limited Carry forward of trade loss relief 402
company 328 Unrelieved qualifying charitable
Business asset disposal relief 329 donations 404
Reinvestment into EIS shares 332 Trade loss relief against total profits 405
Loans to traders 333 Temporary extension of trade loss
Review questions (Set B) 336 relief against total profits 406

vii
Contents

Repayments of corporation tax 409 Accounting for VAT 473

Anti-avoidance legislation 410 The tax point 474
Choice of loss relief 411 Tax invoices 474
Non-trading losses 411 Accounting records 475
Restriction on deduction of Special schemes 476
carried-forward losses 412 Retail schemes 479
Bad debts 480
27 Close companies and investment
Non-deductible input tax 481
companies 415
Partial exemption 483
Close companies 415
Administration of VAT 485
Definition of a close company 415
Penalties, surcharges and interest 487
Exceptions 418
Consequences of close company status 419 31 Inheritance tax 492
Companies with investment business 422 Transfers of value 492
Choice of business medium 423 Exempt transfers 494
Incorporation 427 Potentially exempt transfers (PETs) 496
IHT payable on chargeable lifetime
28 Groups of companies and
transfers 498
reconstructions 430
IHT payable on death 500
Related 51% group companies 430
Valuation 506
Group payment arrangements 433
Business property relief 508
Transfer pricing 433
Agricultural property relief 509
75% groups 434
Administration of IHT 509
Group relief 435
Transfer of chargeable assets within 32 Overseas aspects of taxation 513
a group 438 Residence and domicile 513
Capital losses 440 Income tax - general rules 516
Consortia 441 Double taxation relief (DTR) 517
Corporate interest restriction 443 Income from employment 518
Company reconstructions 443 Trading income 520
Income from property and investments 521
Review questions (Set C) 446
Capital gains tax - general rules 521
Inheritance tax - general rules 522
Part 4 Miscellaneous Corporation tax - general rules 523
Controlled foreign companies (CFCs) 525
29 Value added tax (1) 455 Transfer pricing 526
The principle of VAT 455 Double taxation relief for companies 526
Taxable persons 456 Diverted profits tax 529
Taxable supplies 456 Digital services tax 530
Exempt supplies 458
Reduced rate supplies 459 Review questions (Set D) 533
Zero rate supplies 459
The value of a supply 460 Part 5 Answers
Imports and exports 462
Registration 465 Answers to exercises 541
Deregistration 470 Answers to review questions 593
30 Value added tax (2) 473 Index 605

viii
 Preface

The main aim of this textbook is to describe the UK taxation system in sufficient depth and
with sufficient clarity to meet the needs of those undertaking a first course of study in
taxation. The book has not been written with any specific syllabus in mind but should be
useful to anyone who is studying taxation as part of a university or college course in
accounting, finance or business studies. The book should also be of value to students who
are preparing for the taxation examinations of the professional accounting bodies. A list of
relevant examinations is given on the back cover of the book.
Every effort has been made to explain the tax system as clearly as possible. There are
numerous worked examples and each chapter (except Chapter 1) concludes with a set of
exercises which thoroughly test the reader's grasp of the new topics introduced in that
chapter. The book also contains four sets of review questions, drawn mainly from the past
examination papers of the professional accounting bodies. The solutions to most of these
exercises and questions are located at the back of the book but solutions to those exercises
and questions marked with an asterisk (*) are provided in a separate Instructor's Manual.
This twenty-seventh edition is up-to-date in accordance with the provisions of Finance Act
2021, which is based upon the March 2021 Budget proposals. At the time of writing, the
Finance Act has not yet passed through all of its parliamentary stages but is expected to be
granted Royal Assent during the summer of 2021.
Alan Melville
May 2021

ix
 Acknowledgements

I would like to thank the following accounting bodies for granting me permission to use
their past examination questions:
4 Association of Chartered Certified Accountants (ACCA)
4 Chartered Institute of Public Finance and Accountancy (CIPFA)
4 Association of Accounting Technicians (AAT).
I must emphasise that the answers provided to these questions are entirely my own and are
not the responsibility of the accounting body concerned. I should also point out that the
questions which are printed in this textbook have been amended (in some cases) so as to
reflect changes in taxation law which have occurred since those questions were originally
published by the accounting body concerned.
I would also like to thank the Office for National Statistics for granting me permission to
reproduce the table of Retail Price Indices given in Chapter 24. Furthermore, I am very
grateful to Richard Poole, who has provided the sets of multiple choice questions which
accompany this edition of the book.
Please note that, unless material is specifically cited with a source, any company names
used within this text have been created by me and are intended to be fictitious.
Alan Melville
May 2021

x
 Summary of Tax Data

Income Tax
2021-22 2020-21
†
TAX RATES AND BANDS
Basic rate 20% 20%
Higher rate 40% 40%
Additional rate 45% 45%
Basic rate limit‡ £37,700 £37,500
Higher rate limit £150,000 £150,000
† Different tax rates and bands apply to the non-savings income of Scottish taxpayers (see below)
‡ Basic rate limit frozen at £37,700 until the end of tax year 2025-26

Starting rate for savings 0% 0%

Starting rate limit for savings £5,000 £5,000
Personal savings allowance (basic rate taxpayer) £1,000 £1,000
Personal savings allowance (higher rate taxpayer) £500 £500
Dividend ordinary rate 7.5% 7.5%
Dividend upper rate 32.5% 32.5%
Dividend additional rate 38.1% 38.1%
Dividend allowance £2,000 £2,000

SCOTTISH TAX RATES AND BANDS†

Starter rate 19% 19%
Basic rate 20% 20%
Intermediate rate 21% 21%
Higher rate 41% 41%
Top rate 46% 46%
Starter rate limit £2,097 £2,085
Basic rate limit £12,726 £12,658
Intermediate rate limit £31,092 £30,930
Higher rate limit £150,000 £150,000
† These tax rates and bands apply only to the non-savings income of Scottish taxpayers

xi
Summary of Tax Data

PERSONAL ALLOWANCES
2021-22 2020-21
Personal allowance† £12,570 £12,500
Marriage allowance £1,260 £1,250
Blind person's allowance £2,520 £2,500
Married couple's allowance:
Born before 6 April 1935 £9,125 £9,075
Minimum amount £3,530 £3,510
Income limit for basic personal allowance £100,000 £100,000
Income limit for married couple's allowance £30,400 £30,200
† Personal allowance frozen at £12,570 until the end of tax year 2025-26

CAR AND FUEL BENEFIT

Zero emissions 1% 0%
*1-50 g/km (depending upon electric range) 2%-14% 2%-14%
*51g/km to 54g/km 15% 15%
*55g/km to 59g/km 16% 16%
*60g/km to 64g/km 17% 17%
*65g/km to 69g/km 18% 18%
*70g/km to 74g/km 19% 19%
*75g/km 20% 20%
Each additional 5g/km +1% +1%
Maximum charge 37% 37%
Amount used in car fuel benefit calculation £24,600 £24,500
* These percentages are 1% lower in 2021-22 and 2% lower in 2020-21 if the car was registered
on or after 6 April 2020

CAPITAL ALLOWANCES
Writing Down Allowance (WDA)
Main pool of plant and machinery 18% 18%
Special rate pool of plant and machinery 6% 6%
Annual Investment Allowance (AIA) 100% 100%
AIA annual limit from 1 January 2016† £200,000 £200,000
First Year Allowances (FYAs) 100% 100%
Structures and Buildings Allowances (SBAs) 3% 3%
† AIA annual limit temporarily raised to £1m between 1 January 2019 and 31 December 2021

PENSION SCHEMES
Annual allowance £40,000 £40,000
Lifetime allowance† £1,073,100 £1,073,100
† Lifetime allowance frozen at £1,073,100 until the end of tax year 2025-26

xii
 Summary of Tax Data

National Insurance Contributions

2021-22 2020-21
CLASS 1
Lower earnings limit (weekly) £120 £120
Primary threshold (weekly) £184 £183
Upper earnings limit (weekly) £967 £962
Secondary threshold (weekly) £170 £169
Upper secondary threshold (weekly) £967 £962
Employee contributions
Rate on earnings between primary threshold and UEL 12% 12%
Rate on earnings beyond UEL 2% 2%
Employer contributions
Rate on earnings beyond secondary threshold 13.8% 13.8%
Employment allowance £4,000 £4,000
CLASS 1A
Rate 13.8% 13.8%
CLASS 2
Weekly contribution £3.05 £3.05
Small profits threshold £6,515 £6,475
CLASS 3
Weekly contribution £15.40 £15.30
CLASS 4
Lower profits limit £9,568 £9,500
Upper profits limit £50,270 £50,000
Rate on profits between lower and upper limit 9% 9%
Rate on profits beyond upper limit 2% 2%

Capital Gains Tax

2021-22 2020-21
Standard rate† 10% 10%
Higher rate† 20% 20%
Business asset disposal relief rate 10% 10%
Business asset disposal relief lifetime limit £1,000,000 £1,000,000
Annual exempt amount‡ £12,300 £12,300
† Taxable gains on the disposal of residential property are taxed at 18% and 28%
‡ Annual exempt amount frozen at £12,300 until the end of tax year 2025-26

xiii
Other documents randomly have
different content
confused with the Berkeleyan theory mentioned above. Berkeley maintains
the subjective nature of my perceptual contents, but he does not say that I
can know only my own ideas. He limits my knowledge to my ideas
because, on his view, there are no objects other than ideas. What I perceive
as a table no longer exists, according to Berkeley, when I cease to look at it.
This is why Berkeley holds that our percepts are created directly by the
omnipotence of God. I see a table because God causes this percept in me.
For Berkeley, therefore, nothing is real except God and human spirits. What
we call the “world” exists only in spirits. What the naïve man calls the outer
world, or material nature, is for Berkeley non-existent. This theory is
confronted by the now predominant Kantian view which limits our
knowledge of the world to our ideas, not because of any conviction that
nothing beyond these ideas exists, but because it holds that we are so
organised that we can have knowledge only of the changes within our own
selves, not of the things-in-themselves which are the causes of these
changes. This view concludes from the fact that I know only my own ideas,
not that there is no reality independent of them, but only that the subject
cannot have direct knowledge of such reality. The mind can merely
“through the medium of its subjective thoughts imagine it, conceive it,
know it, or perhaps also fail to know it” (O. Liebmann, Zur Analysis der
Wirklichkeit, p. 28). Kantians believe that their principles are absolutely
certain, indeed immediately evident, without any proof. “The most
fundamental principle which the philosopher must begin by grasping
clearly, consists in the recognition that our knowledge, in the first instance,
does not extend beyond our ideas. Our ideas are all that we immediately
have and experience, and just because we have immediate experience of
them the most radical doubt cannot rob us of this knowledge. On the other
hand, the knowledge which transcends my ideas—taking ideas here in the
widest possible sense, so as to include all psychical processes—is not proof
against doubt. Hence, at the very beginning of all philosophy we must
explicitly set down all knowledge which transcends ideas as open to doubt.”
These are the opening sentences of Volkelt’s book on Kant’s Theory of
Knowledge. What is here put forward as an immediate and self-evident truth
is, in reality, the conclusion of a piece of argument which runs as follows.
Naïve common sense believes that things, just as we perceive them, exist
also outside our minds. Physics, Physiology, and Psychology, however,
teach us that our percepts are dependent on our organisation, and that
therefore we cannot know anything about external objects except what our
organisation transmits to us. The objects which we perceive are thus
modifications of our organisation, not things-in-themselves. This line of
thought has, in fact, been characterised by Ed. von Hartmann as the one
which leads necessarily to the conviction that we can have direct knowledge
only of our own ideas (cp. his Grundproblem der Erkenntnistheorie, pp.
16–40). Because outside our organisms we find vibrations of particles and
of air, which are perceived by us as sounds, it is concluded that what we call
sound is nothing more than a subjective reaction of our organisms to these
motions in the external world. Similarly, colour and heat are inferred to be
merely modifications of our organisms. And, further, these two kinds of
percepts are held to be the effects of processes in the external world which
are utterly different from what we experience as heat or as colour. When
these processes stimulate the nerves in the skin of my body, I perceive heat;
when they stimulate the optical nerve I perceive light and colour. Light,
colour, and heat, then, are the reactions of my sensory nerves to external
stimuli. Similarly, the sense of touch reveals to me, not the objects of the
outer world, but only states of my own body. The physicist holds that
bodies are composed of infinitely small particles called molecules, and that
these molecules are not in direct contact with one another, but have definite
intervals between them. Between them, therefore, is empty space. Across
this space they act on one another by attraction and repulsion. If I put my
hand on a body, the molecules of my hand by no means touch those of the
body directly, but there remains a certain distance between body and hand,
and what I experience as the body’s resistance is nothing but the effect of
the force of repulsion which its molecules exert on my hand. I am
absolutely external to the body and experience only its effects on my
organism.

The theory of the so-called Specific Nervous Energy, which has been
advanced by J. Müller, supplements these speculations. It asserts that each
sense has the peculiarity that it reacts to all external stimuli in only one
definite way. If the optic nerve is stimulated, light sensations result,
irrespective of whether the stimulation is due to what we call light, or to
mechanical pressure, or an electrical current. On the other hand, the same
external stimulus applied to different senses gives rise to different
sensations. The conclusion from these facts seems to be, that our sense-
organs can give us knowledge only of what occurs in themselves, but not of
the external world. They determine our percepts, each according to its own
nature.

Physiology shows, further, that there can be no direct knowledge even of

the effects which objects produce on our sense-organs. Through his study of
the processes which occur in our own bodies, the physiologist finds that,
even in the sense-organs, the effects of the external process are modified in
the most diverse ways. We can see this most clearly in the case of eye and
ear. Both are very complicated organs which modify the external stimulus
considerably, before they conduct it to the corresponding nerve. From the
peripheral end of the nerve the modified stimulus is then conducted to the
brain. Here the central organs must in turn be stimulated. The conclusion is,
therefore, drawn that the external process undergoes a series of
transformations before it reaches consciousness. The brain processes are
connected by so many intermediate links with the external stimuli, that any
similarity between them is out of the question. What the brain ultimately
transmits to the soul is neither external processes, nor processes in the
sense-organs, but only such as occur in the brain. But even these are not
apprehended immediately by the soul. What we finally have in
consciousness are not brain processes at all, but sensations. My sensation of
red has absolutely no similarity with the process which occurs in the brain
when I sense red. The sensation, again, occurs as an effect in the mind, and
the brain process is only its cause. This is why Hartmann (Grundproblem
der Erkenntnistheorie, p. 37) says, “What the subject experiences is
therefore only modifications of his own psychical states and nothing else.”
However, when I have sensations, they are very far as yet from being
grouped in those complexes which I perceive as “things.” Only single
sensations can be transmitted to me by the brain. The sensations of hardness
and softness are transmitted to me by the organ of touch, those of colour
and light by the organ of sight. Yet all these are found united in one object.
This unification must, therefore, be brought about by the soul itself; that is,
the soul constructs things out of the separate sensations which the brain
conveys to it. My brain conveys to me singly, and by widely different paths,
the visual, tactual, and auditory sensations which the soul then combines
into the idea of a trumpet. Thus, what is really the result of a process (i.e.,
the idea of a trumpet), is for my consciousness the primary datum. In this
result nothing can any longer be found of what exists outside of me and
originally stimulated my sense-organs. The external object is lost entirely
on the way to the brain and through the brain to the soul.

It would be hard to find in the history of human speculation another edifice

of thought which has been built up with greater ingenuity, and which yet, on
closer analysis, collapses into nothing. Let us look a little closer at the way
it has been constructed. The theory starts with what is given in naïve
consciousness, i.e., with things as perceived. It proceeds to show that none
of the qualities which we find in these things would exist for us, had we no
sense-organs. No eye—no colour. Therefore, the colour is not, as yet,
present in the stimulus which affects the eye. It arises first through the
interaction of the eye and the object. The latter is, therefore, colourless. But
neither is the colour in the eye, for in the eye there is only a chemical, or
physical, process which is first conducted by the optic nerve to the brain,
and there initiates another process. Even this is not yet the colour. That is
only produced in the soul by means of the brain process. Even then it does
not yet appear in consciousness, but is first referred by the soul to a body in
the external world. There I finally perceive it, as a quality of this body. We
have travelled in a complete circle. We are conscious of a coloured object.
That is the starting-point. Here thought begins its construction. If I had no
eye, the object would be, for me, colourless. I cannot, therefore, attribute
the colour to the object. I must look for it elsewhere. I look for it, first, in
the eye—in vain; in the nerve—in vain; in the brain—in vain once more; in
the soul—here I find it indeed, but not attached to the object. I recover the
coloured body only on returning to my starting-point. The circle is
completed. The theory leads me to identify what the naïve man regards as
existing outside of him, as really a product of my mind.

As long as one stops here everything seems to fit beautifully. But we must
go over the argument once more from the beginning. Hitherto I have used,
as my starting-point, the object, i.e., the external percept of which up to
now, from my naïve standpoint, I had a totally wrong conception. I thought
that the percept, just as I perceive it, had objective existence. But now I
observe that it disappears with my act of perception, that it is only a
modification of my mental state. Have I, then, any right at all to start from it
in my arguments? Can I say of it that it acts on my soul? I must henceforth
treat the table of which formerly I believed that it acted on me, and
produced an idea of itself in me, as itself an idea. But from this it follows
logically that my sense-organs, and the processes in them are also merely
subjective. I have no right to talk of a real eye but only of my idea of an
eye. Exactly the same is true of the nerve paths, and the brain processes,
and even of the process in the soul itself, through which things are supposed
to be constructed out of the chaos of diverse sensations. If assuming the
truth of the first circle of argumentation, I run through the steps of my
cognitive activity once more, the latter reveals itself as a tissue of ideas
which, as such, cannot act on one another. I cannot say that my idea of the
object acts on my idea of the eye, and that from this interaction results my
idea of colour. But it is necessary that I should say this. For as soon as I see
clearly that my sense-organs and their activity, my nerve- and soul-
processes, can also be known to me only through perception, the argument
which I have outlined reveals itself in its full absurdity. It is quite true that I
can have no percept without the corresponding sense-organ. But just as little
can I be aware of a sense-organ without perception. From the percept of a
table I can pass to the eye which sees it, or the nerves in the skin which
touches it, but what takes place in these I can, in turn, learn only from
perception. And then I soon perceive that there is no trace of similarity
between the process which takes place in the eye and the colour which I
see. I cannot get rid of colour sensations by pointing to the process which
takes place in the eye whilst I perceive a colour. No more can I re-discover
the colour in the nerve- or brain-processes. I only add a new percept,
localised within the organism, to the first percept which the naïve man
localises outside of his organism. I only pass from one percept to another.

Moreover, there is a break in the whole argument. I can follow the

processes in my organism up to those in my brain, even though my
assumptions become more and more hypothetical as I approach the central
processes of the brain. The method of external observation ceases with the
process in my brain, more particularly with the process which I should
observe, if I could treat the brain with the instruments and methods of
Physics and Chemistry. The method of internal observation, or
introspection, begins with the sensations, and includes the construction of
things out of the material of sense-data. At the point of transition from brain
process to sensation, there is a break in the sequence of observation.

The theory which I have here described, and which calls itself Critical
Idealism, in contrast to the standpoint of naïve common sense which it calls
Naïve Realism, makes the mistake of characterising one group of percepts
as ideas, whilst taking another group in the very same sense as the Naïve
Realism which it apparently refutes. It establishes the ideal character of
percepts by accepting naïvely, as objectively valid facts, the percepts
connected with one’s own body; and, in addition, it fails to see that it
confuses two spheres of observation, between which it can find no
connecting link.

Critical Idealism can refute Naïve Realism only by itself assuming, in

naïve-realistic fashion, that one’s own organism has objective existence. As
soon as the Idealist realises that the percepts connected with his own
organism stand on exactly the same footing as those which Naïve Realism
assumes to have objective existence, he can no longer use the former as a
safe foundation for his theory. He would, to be consistent, have to regard
his own organism also as a mere complex of ideas. But this removes the
possibility of regarding the content of the perceptual world as a product of
the mind’s organisation. One would have to assume that the idea “colour”
was only a modification of the idea “eye.” So-called Critical Idealism can
be established only by borrowing the assumptions of Naïve Realism. The
apparent refutation of the latter is achieved only by uncritically accepting its
own assumptions as valid in another sphere.

This much, then, is certain: Analysis within the world of percepts cannot
establish Critical Idealism, and, consequently, cannot strip percepts of their
objective character.

Still less is it legitimate to represent the principle that “the perceptual world
is my idea” as self-evident and needing no proof. Schopenhauer begins his
chief work, The World as Will and Idea, with the words: “The world is my
idea—this is a truth which holds good for everything that lives and knows,
though man alone can bring it into reflective and abstract consciousness. If
he really does this, he has attained to philosophical wisdom. It then
becomes clear and certain to him that what he knows is not a sun and an
earth, but only an eye that sees a sun, a hand that feels an earth; that the
world which surrounds him is there only in idea, i.e., only in relation to
something else, the consciousness which is himself. If any truth can be
asserted a priori, it is this: for it is the expression of the most general form
of all possible and thinkable experience, a form which is more general than
time, or space, or causality, for they all presuppose it …” (The World as Will
and Idea, Book I, par. 1). This whole theory is wrecked by the fact, already
mentioned above, that the eyes and the hand are just as much percepts as
the sun and the earth. Using Schopenhauer’s vocabulary in his own sense, I
might maintain against him that my eye which sees the sun, and my hand
which feels the earth, are my ideas just like the sun and the earth
themselves. That, put in this way, the whole theory cancels itself, is clear
without further argument. For only my real eye and my real hand, but not
my ideas “eye” and “hand,” could own the ideas “sun” and “earth” as
modifications. Yet it is only in terms of these ideas that Critical Idealism has
the right to speak.

Critical Idealism is totally unable to gain an insight unto the relation of

percept to idea. It cannot make the separation, mentioned on p. 58, between
what happens to the percept in the process of perception and what must be
inherent in it prior to perception. We must therefore attempt this problem in
another way.
V
 OUR KNOWLEDGE OF THE WORLD
From the foregoing considerations it follows that it is impossible to prove,
by analysis of the content of our perceptions, that our percepts are ideas.
This is supposed to be proved by showing that, if the process of perceiving
takes place in the way in which we conceive it in accordance with the
naïve-realistic assumptions concerning the psychological and physiological
constitution of human individuals, then we have to do, not with things
themselves, but merely with our ideas of things. Now, if Naïve Realism,
when consistently thought out, leads to results which directly contradict its
presuppositions, then these presuppositions must be discarded as unsuitable
for the foundation of a theory of the world. In any case, it is inadmissible to
reject the presuppositions and yet accept the consequences, as the Critical
Idealist does who bases his assertion that the world is my idea on the line of
argument indicated above. (Eduard von Hartmann gives in his work Das
Grundproblem der Erkenntnistheorie a full account of this line of
argument.)

The truth of Critical Idealism is one thing, the persuasiveness of its proofs
another. How it stands with the former, will appear later in the course of our
argument, but the persuasiveness of its proofs is nil. If one builds a house,
and the ground floor collapses whilst the first floor is being built, then the
first floor collapses too. Naïve Realism and Critical Idealism are related to
one another like the ground floor to the first floor in this simile.

For one who holds that the whole perceptual world is only an ideal world,
and, moreover, the effect of things unknown to him acting on his soul, the
real problem of knowledge is naturally concerned, not with the ideas
present only in the soul, but with the things which lie outside his
consciousness, and which are independent of him. He asks, How much can
we learn about them indirectly, seeing that we cannot observe them
directly? From this point of view, he is concerned, not with the connection
of his conscious percepts with one another, but with their causes which
transcend his consciousness and exist independently of him, whereas the
percepts, on his view, disappear as soon as he turns his sense-organs away
from the things themselves. Our consciousness, on this view, works like a
mirror from which the pictures of definite things disappear the very moment
its reflecting surface is not turned towards them. If, now, we do not see the
things themselves, but only their reflections, we must obtain knowledge of
the nature of the former indirectly by drawing conclusions from the
character of the latter. The whole of modern science adopts this point of
view, when it uses percepts only as a means of obtaining information about
the motions of matter which lie behind them, and which alone really “are.”
If the philosopher, as Critical Idealist, admits real existence at all, then his
sole aim is to gain knowledge of this real existence indirectly by means of
his ideas. His interest ignores the subjective world of ideas, and pursues
instead the causes of these ideas.

The Critical Idealist can, however, go even further and say, I am confined to
the world of my own ideas and cannot escape from it. If I conceive a thing
beyond my ideas, this concept, once more, is nothing but my idea. An
Idealist of this type will either deny the thing-in-itself entirely or, at any
rate, assert that it has no significance for human minds, i.e., that it is as
good as non-existent since we can know nothing of it.

To this kind of Critical Idealist the whole world seems a chaotic dream, in
the face of which all striving for knowledge is simply meaningless. For him
there can be only two sorts of men: (1) victims of the illusion that the
dreams they have woven themselves are real things, and (2) wise men who
see through the nothingness of this dream world, and who gradually lose all
desire to trouble themselves further about it. From this point of view, even
one’s own personality may become a mere dream phantom. Just as during
sleep there appears among my dream-images an image of myself, so in
waking consciousness the idea of my own Self is added to the idea of the
outer world. I have then given to me in consciousness, not my real Self, but
only my idea of my Self. Whoever denies that things exist, or, at least, that
we can know anything of them, must also deny the existence, respectively
the knowledge, of one’s own personality. This is how the Critical Idealist
comes to maintain that “All reality transforms itself into a wonderful dream,
without a life which is the object of the dream, and without a mind which
has the dream; into a dream which is nothing but a dream of itself.” (Cp.
Fichte, Die Bestimmung des Menschen.)

Whether he who believes that he recognises immediate experience to be a

dream, postulates nothing behind this dream, or whether he relates his ideas
to actual things, is immaterial. In both cases life itself must lose all
scientific interest for him. However, whereas for those who believe that the
whole of accessible reality is exhausted in dreams, all science is an
absurdity, for those who feel compelled to argue from ideas to things,
science consists in studying these things-in-themselves. The first of these
theories of the world may be called Absolute Illusionism, the second is
called Transcendental Realism1 by its most rigorously logical exponent,
Eduard von Hartmann.

These two points of view have this in common with Naïve Realism, that
they seek to gain a footing in the world by means of an analysis of percepts.
Within this sphere, however, they are unable to find any stable point.

One of the most important questions for an adherent of Transcendental

Realism would have to be, how the Ego constructs the world of ideas out of
itself. A world of ideas which was given to us, and which disappeared as
soon as we shut our senses to the external world, might provoke an earnest
desire for knowledge, in so far as it was a means for investigating indirectly
the world of the self-existing Self. If the things of our experience were
“ideas,” then our everyday life would be like a dream, and the discovery of
the true facts like waking. Even our dream-images interest us as long as we
dream and, consequently, do not detect their dream character. But as soon as
we wake, we no longer look for the connections of our dream-images
among themselves, but rather for the physical, physiological, and
psychological processes which underlie them. In the same way, a
philosopher who holds the world to be his idea, cannot be interested in the
reciprocal relations of the details within the world. If he admits the
existence of a real Ego at all, then his question will be, not how one of his
ideas is associated with another, but what takes place in the Soul which is
independent of these ideas, while a certain train of ideas passes through his
consciousness. If I dream that I am drinking wine which makes my throat
burn, and then wake up with a fit of coughing (cp. Weygandt, Entstehung
der Träume, 1893) I cease, the moment I wake, to be interested in the
dream-experience for its own sake. My attention is now concerned only
with the physiological and psychological processes by means of which the
irritation which causes me to cough, comes to be symbolically expressed in
the dream. Similarly, once the philosopher is convinced that the given world
consists of nothing but ideas, his interest is bound to switch from them at
once to the soul which is the reality lying behind them. The matter is more
serious, however, for the Illusionist who denies the existence of an Ego
behind the “ideas,” or at least holds this Ego to be unknowable. We might
very easily be led to such a view by the reflection that, in contrast to
dreaming, there is the waking state in which we have the opportunity to
detect our dreams, and to realise the real relations of things, but that there is
no state of the self which is related similarly to our waking conscious life.
Every adherent of this view fails entirely to see that there is, in fact,
something which is to mere perception what our waking experience to our
dreams. This something is thought.

The naïve man cannot be charged with failure to perceive this. He accepts
life as it is, and regards things as real just as they present themselves to him
in experience. The first step, however, which we take beyond this
standpoint can be only this, that we ask how thought is related to
perception. It makes no difference whether or no the percept, as given to
me, has a continuous existence before and after I perceive it. If I want to
assert anything whatever about it, I can do so only with the help of thought.
When I assert that the world is my idea, I have enunciated the result of an
act of thought, and if my thought is not applicable to the world, then my
result is false. Between a percept and every kind of judgment about it there
intervenes thought.

The reason why, in our discussion about things, we generally overlook the
part played by thought, has already been given above (p. 31). It lies in the
fact that our attention is concentrated only on the object about which we
think, but not at the same time on the thinking itself. The naïve mind,
therefore, treats thought as something which has nothing to do with things,
but stands altogether aloof from them and makes its theories about them.
The theory which the thinker constructs concerning the phenomena of the
world is regarded, not as part of the real things, but as existing only in
men’s heads. The world is complete in itself even without this theory. It is
all ready-made and finished with all its substances and forces, and of this
ready-made world man makes himself a picture. Whoever thinks thus need
only be asked one question. What right have you to declare the world to be
complete without thought? Does not the world cause thoughts in the minds
of men with the same necessity as it causes the blossoms on plants? Plant a
seed in the earth. It puts forth roots and stem, it unfolds into leaves and
blossoms. Set the plant before yourselves. It connects itself, in your minds,
with a definite concept. Why should this concept belong any less to the
whole plant than leaf and blossom? You say the leaves and blossoms exist
quite apart from an experiencing subject. The concept appears only when a
human being makes an object of the plant. Quite so. But leaves and
blossoms also appear on the plant only if there is soil in which the seed can
be planted, and light and air in which the blossoms and leaves can unfold.
Just so the concept of a plant arises when a thinking being comes into
contact with the plant.

It is quite arbitrary to regard the sum of what we experience of a thing

through bare perception as a totality, a whole, while that which thought
reveals in it is regarded as a mere accretion which has nothing to do with
the thing itself. If I am given a rosebud to-day, the percept that offers itself
to me is complete only for the moment. If I put the bud into water, I shall
to-morrow get a very different picture of my object. If I watch the rosebud
without interruption, I shall see to-day’s state gradually change into to-
morrow’s through an infinite number of intermediate stages. The picture
which presents itself to me at any one moment is only a chance section out
of the continuous process of growth in which the object is engaged. If I do
not put the bud into water, a whole series of states, the possibility of which
lay in the bud, will not be realised. Similarly, I may be prevented to-morrow
from watching the blossom further, and thus carry away an incomplete
picture of it.
It would be a quite unscientific and arbitrary judgment which declared of
any haphazard appearance of a thing, this is the thing.

To regard the sum of perceptual appearances as the thing is no more

legitimate. It might be quite possible for a mind to receive the concept at the
same time as, and together with, the percept. To such a mind it would never
occur that the concept did not belong to the thing. It would have to ascribe
to the concept an existence indivisibly bound up with the thing.

Let me make myself clearer by another example. If I throw a stone

horizontally through the air, I perceive it in different places at different
times. I connect these places so as to form a line. Mathematics teaches me
to distinguish various kinds of lines, one of which is the parabola. I know a
parabola to be a line which is produced by a point moving according to a
certain well-defined law. If I analyse the conditions under which the stone
thrown by me moves, I find that the line of its flight is identical with the
line I know as a parabola. That the stone moves exactly in a parabola is a
result of the given conditions and follows necessarily from them. The form
of the parabola belongs to the whole phenomenon as much as any other
feature of it. The hypothetical mind described above which has no need of
the roundabout way of thought, would find itself presented, not only with a
sequence of visual percepts at different points, but, as part and parcel of
these phenomena, also with the parabolic form of the line of flight, which
we can add to the phenomenon only by an act of thought.

It is not due to the real objects that they appear to us at first without their
conceptual sides, but to our mental organisation. Our whole organisation
functions in such a way that in the apprehension of every real thing the
relevant elements come to us from two sources, viz., from perception and
from thought.

The nature of things is indifferent to the way I am organised for

apprehending them. The breach between perception and thought exists only
from the moment that I confront objects as spectator. But which elements
do, and which do not, belong to the objects, cannot depend on the manner in
which I obtain my knowledge of them.
Man is a being with many limitations. First of all, he is a thing among other
things. His existence is in space and time. Hence but a limited portion of the
total universe can ever be given to him. This limited portion, however, is
linked up with other parts on every side both in time and in space. If our
existence were so linked with things that every process in the object world
were also a process in us, there would be no difference between us and
things. Neither would there be any individual objects for us. All processes
and events would then pass continuously one into the other. The cosmos
would be a unity and a whole complete in itself. The stream of events
would nowhere be interrupted. But owing to our limitations we perceive as
an individual object what, in truth, is not an individual object at all.
Nowhere, e.g., is the particular quality “red” to be found by itself in
abstraction. It is surrounded on all sides by other qualities to which it
belongs, and without which it could not subsist. For us, however, it is
necessary to isolate certain sections of the world and to consider them by
themselves. Our eye can seize only single colours one after another out of a
manifold colour-complex, our understanding only single concepts out of a
connected conceptual system. This isolation is a subjective act, which is due
to the fact that we are not identical with the world-process, but are only
things among other things.

It is of the greatest importance for us to determine the relation of ourselves,

as things, to all other things. The determining of this relation must be
distinguished from merely becoming conscious of ourselves. For this self-
awareness we depend on perception just as we do for our awareness of any
other thing. The perception of myself reveals to me a number of qualities
which I combine into an apprehension of my personality as a whole, just as
I combine the qualities, yellow, metallic, hard, etc., in the unity “gold.” This
kind of self-consciousness does not take me beyond the sphere of what
belongs to me. Hence it must be distinguished from the determination of
myself by thought. Just as I determine by thought the place of any single
percept of the external world in the whole cosmic system, so I fit by an act
of thought what I perceive in myself into the order of the world-process.
My self-observation restricts me within definite limits, but my thought has
nothing to do with these limits. In this sense I am a two-sided being. I am
contained within the sphere which I apprehend as that of my personality,
but I am also the possessor of an activity which, from a higher standpoint,
determines my finite existence. Thought is not individual like sensation and
feeling; it is universal. It receives an individual stamp in each separate
human being only because it comes to be related to his individual feelings
and sensations. By means of these particular colourings of the universal
thought, individual men are distinguished from one another. There is only
one single concept of “triangle.” It is quite immaterial for the content of this
concept whether it is in A’s consciousness or in B’s. It will, however, be
grasped by each of the two minds in its own individual way.

This thought conflicts with a common prejudice which is very hard to

overcome. The victims of this prejudice are unable to see that the concept of
a triangle which my mind grasps is the same as the concept which my
neighbour’s mind grasps. The naïve man believes himself to be the creator
of his concepts. Hence he believes that each person has his private
concepts. One of the first things which philosophic thought requires of us is
to overcome this prejudice. The one single concept of “triangle” does not
split up into many concepts because it is thought by many minds. For the
thought of the many is itself a unity.

In thought we have the element which welds each man’s special

individuality into one whole with the cosmos. In so far as we sense and feel
(perceive), we are isolated individuals; in so far as we think, we are the All-
One Being which pervades everything. This is the deeper meaning of our
two-sided nature. We are conscious of an absolute principle revealing itself
in us, a principle which is universal. But we experience it, not as it issues
from the centre of the world, but rather at a point on the periphery. Were the
former the case, we should know, as soon as ever we became conscious, the
solution of the whole world problem. But since we stand at a point on the
periphery, and find that our own being is confined within definite limits, we
must explore the region which lies beyond our own being with the help of
thought, which is the universal cosmic principle manifesting itself in our
minds.

The fact that thought, in us, reaches out beyond our separate existence and
relates itself to the universal world-order, gives rise to the desire for
knowledge in us. Beings without thought do not experience this desire.
When they come in contact with other things no questions arise for them.
These other things remain external to such beings. But in thinking beings
the concept confronts the external thing. It is that part of the thing which we
receive not from without, but from within. To assimilate, to unite, the two
elements, the inner and the outer, that is the function of knowledge.

The percept, thus, is not something finished and self-contained, but one side
only of the total reality. The other side is the concept. The act of cognition is
the synthesis of percept and concept. And it is only the union of percept and
concept which constitutes the whole thing.

The preceding discussion shows clearly that it is futile to seek for any other
common element in the separate things of the world than the ideal content
which thinking supplies. All attempts to discover any other principle of
unity in the world than this internally coherent ideal content, which we gain
for ourselves by the conceptual analysis of our percepts, are bound to fail.
Neither a personal God, nor force, nor matter, nor the blind will (of
Schopenhauer and Hartmann), can be accepted by us as the universal
principle of unity in the world. These principles all belong only to a limited
sphere of our experience. Personality we experience only in ourselves, force
and matter only in external things. The will, again, can be regarded only as
the expression of the activity of our finite personalities. Schopenhauer
wants to avoid making “abstract” thought the principle of unity in the
world, and seeks instead something which presents itself to him
immediately as real. This philosopher holds that we can never solve the
riddle of the world so long as we regard it as an “external” world. “In fact,
the meaning for which we seek of that world which is present to us only as
our idea, or the transition from the world as mere idea of the knowing
subject to whatever it may be besides this, would never be found if the
investigator himself were nothing more than the pure knowing subject (a
winged cherub without a body). But he himself is rooted in that world: he
finds himself in it as an individual, that is to say, his knowledge, which is
the necessary supporter of the whole world as idea, is yet always given
through the medium of a body, whose affections are, as we have shown, the
starting-point for the understanding in the perception of that world. His
body is, for the pure knowing subject, an idea like every other idea, an
object among objects. Its movements and actions are so far known to him in
precisely the same way as the changes of all other perceived objects, and
would be just as strange and incomprehensible to him if their meaning were
not explained for him in an entirely different way …. The body is given in
two entirely different ways to the subject of knowledge, who becomes an
individual only through his identity with it. It is given as an idea in
intelligent perception, as an object among objects and subject to the laws of
objects. And it is also given in quite a different way as that which is
immediately known to every one, and is signified by the word ‘will.’ Every
true act of his will is also at once and without exception a movement of his
body. The act of will and the movement of the body are not two different
things objectively known, which the bond of causality unites; they do not
stand in the relation of cause and effect; they are one and the same, but they
are given in entirely different ways—immediately, and again in perception
for the understanding.” (The World as Will and Idea, Book 2, § 18.)
Schopenhauer considers himself entitled by these arguments to hold that the
will becomes objectified in the human body. He believes that in the
activities of the body he has an immediate experience of reality, of the
thing-in-itself in the concrete. Against these arguments we must urge that
the activities of our body become known to us only through self-
observation, and that, as such, they are in no way superior to other percepts.
If we want to know their real nature, we can do so only by means of
thought, i.e., by fitting them into the ideal system of our concepts and ideas.

One of the most deeply rooted prejudices of the naïve mind is the opinion
that thinking is abstract and empty of any concrete content. At best, we are
told, it supplies but an “ideal” counterpart of the unity of the world, but
never that unity itself. Whoever holds this view has never made clear to
himself what a percept apart from concepts really is. Let us see what this
world of bare percepts is. A mere juxtaposition in space, a mere succession
in time, a chaos of disconnected particulars—that is what it is. None of
these things which come and go on the stage of perception has any
connection with any other. The world is a multiplicity of objects without
distinctions of value. None plays any greater part in the nexus of the world
than any other. In order to realise that this or that fact has a greater
importance than another we must go to thought. As long as we do not think,
the rudimentary organ of an animal which has no significance in its life,
appears equal in value to its more important limbs. The particular facts
reveal their meaning, in themselves and in their relations with other parts of
the world, only when thought spins its threads from thing to thing. This
activity of thinking has always a content. For it is only through a perfectly
definite concrete content that I can know why the snail belongs to a lower
type of organisation than the lion. The mere appearance, the percept, gives
me no content which could inform me as to the degree of perfection of the
organisation.

Thought contributes this content to the percept from the world of concepts
and ideas. In contrast with the content of perception which is given to us
from without, the content of thought appears within our minds. The form in
which thought first appears in consciousness we will call “intuition.”
Intuition is to thoughts what observation is to percepts. Intuition and
observation are the sources of our knowledge. An external object which we
observe remains unintelligible to us, until the corresponding intuition arises
within us which adds to the reality those sides of it which are lacking in the
percept. To anyone who is incapable of supplying the relevant intuitions,
the full nature of the real remains a sealed book. Just as the colour-blind
person sees only differences of brightness without any colour qualities, so
the mind which lacks intuition sees only disconnected fragments of
percepts.

To explain a thing, to make it intelligible, means nothing else than to place

it in the context from which it has been torn by the peculiar organisation of
our minds, described above. Nothing can possibly exist cut off from the
universe. Hence all isolation of objects has only subjective validity for
minds organised like ours. For us the universe is split up into above and
below, before and after, cause and effect, object and idea, matter and force,
object and subject, etc. The objects which, in observation, appear to us as
separate, become combined, bit by bit, through the coherent, unified system
of our intuitions. By thought we fuse again into one whole all that
perception has separated.
An object presents riddles to our understanding so long as it exists in
isolation. But this is an abstraction of our own making and can be unmade
again in the world of concepts.

Except through thought and perception nothing is given to us directly. The

question now arises as to the interpretation of percepts on our theory. We
have learnt that the proof which Critical Idealism offers for the subjective
nature of percepts collapses. But the exhibition of the falsity of the proof is
not, by itself, sufficient to show that the doctrine itself is an error. Critical
Idealism does not base its proof on the absolute nature of thought, but relies
on the argument that Naïve Realism, when followed to its logical
conclusion, contradicts itself. How does the matter appear when we
recognise the absoluteness of thought?

Let us assume that a certain percept, e.g., red, appears in consciousness. To

continued observation, the percept shows itself to be connected with other
percepts, e.g., a certain figure, temperature, and touch-qualities. This
complex of percepts I call an object in the world of sense. I can now ask
myself: Over and above the percepts just mentioned, what else is there in
the section of space in which they are? I shall then find mechanical,
chemical, and other processes in that section of space. I next go further and
study the processes which take place between the object and my sense-
organs. I shall find oscillations in an elastic medium, the character of which
has not the least in common with the percepts from which I started. I get the
same result if I trace further the connection between sense-organs and brain.
In each of these inquiries I gather new percepts, but the connecting thread
which binds all these spatially and temporally separated percepts into one
whole, is thought. The air vibrations which carry sound are given to me as
percepts just like the sound. Thought alone links all these percepts one to
the other and exhibits them in their reciprocal relations. We have no right to
say that over and above our immediate percepts there is anything except the
ideal nexus of precepts (which thought has to reveal). The relation of the
object perceived to the perceiving subject, which relation transcends the
bare percept, is therefore purely ideal, i.e., capable of being expressed only
through concepts. Only if it were possible to perceive how the object of
perception affects the perceiving subject, or, alternatively, only if I could
watch the construction of the perceptual complex through the subject, could
we speak as modern Physiology, and the Critical Idealism which is based on
it, speak. Their theory confuses an ideal relation (that of the object to the
subject) with a process of which we could speak only if it were possible to
perceive it. The proposition, “No colour without a colour-sensing eye,”
cannot be taken to mean that the eye produces the colour, but only that an
ideal relation, recognisable by thought, subsists between the percept
“colour” and the percept “eye.”

To empirical science belongs the task of ascertaining how the properties of

the eye and those of the colours are related to one another; by means of
what structures the organ of sight makes possible the perception of colours,
etc. I can trace how one percept succeeds another and how one is related to
others in space, and I can formulate these relations in conceptual terms, but
I can never perceive how a percept originates out of the non-perceptible. All
attempts to seek any relations between percepts other than conceptual
relations must of necessity fail.

What then is a percept? This question, asked in this general way, is absurd.
A percept appears always as a perfectly determinate, concrete content. This
content is immediately given and is completely contained in the given. The
only question one can ask concerning the given content is, what it is apart
from perception, that is, what it is for thought. The question concerning the
“what” of a percept can, therefore, only refer to the conceptual intuition
which corresponds to the percept. From this point of view, the problem of
the subjectivity of percepts, in the sense in which the Critical Idealists
debate it, cannot be raised at all. Only that which is experienced as
belonging to the subject can be termed “subjective.” To form a link between
subject and object is impossible for any real process, in the naïve sense of
the word “real,” in which it means a process which can be perceived. That
is possible only for thought. For us, then, “objective” means that which, for
perception, presents itself as external to the perceiving subject. As subject
of perception I remain perceptible to myself after the table which now
stands before me has disappeared from my field of observation. The
perception of the table has produced a modification in me which persists
like myself. I preserve an image of the table which now forms part of my
Self. Modern Psychology terms this image a “memory-idea.” Now this is
the only thing which has any right to be called the idea of the table. For it is
the perceptible modification of my own mental state through the presence
of the table in my visual field. Moreover, it does not mean a modification in
some “Ego-in-itself” behind the perceiving subject, but the modification of
the perceiving subject itself. The idea is, therefore, a subjective percept, in
contrast with the objective percept which occurs when the object is present
in the perceptual field. The false identification of the subjective with this
objective percept leads to the misunderstanding of Idealism: The world is
my idea.

Our next task must be to define the concept of “idea” more nearly. What we
have said about it so far does not give us the concept, but only shows us
where in the perceptual field ideas are to be found. The exact concept of
“idea” will also make it possible for us to obtain a satisfactory
understanding of the relation of idea and object. This will then lead us over
the border-line, where the relation of subject to object is brought down from
the purely conceptual field of knowledge into concrete individual life. Once
we know how we are to conceive the world, it will be an easy task to adapt
ourselves to it. Only when we know to what object we are to devote our
activity can we put our whole energy into our actions.

Addition to the Revised Edition (1918).

The view which I have here outlined may be regarded as one to which man
is led as it were spontaneously, as soon as he begins to reflect about his
relation to the world. He then finds himself caught in a system of thoughts
which dissolves for him as fast as he frames it. The thoughts which form
this system are such that the purely theoretical refutation of them does not
exhaust our task. We have to live through them, in order to understand the
confusion into which they lead us, and to find the way out. They must
figure in any discussion of the relation of man to the world, not for the sake
of refuting others whom one believes to be holding mistaken views about
this relation, but because it is necessary to understand the confusion in
which all first efforts at reflection about such a relation are apt to issue. One
needs to learn by experience how to refute oneself with respect to these first
reflections. This is the point of view from which the arguments of the
preceding chapter are to be understood.

Whoever tries to work out for himself a theory of the relation of man to the
world, becomes aware of the fact that he creates this relation, at least in
part, by forming ideas about the things and events in the world. In
consequence, his attention is deflected from what exists outside in the world
and directed towards his inner world, the realm of his ideas. He begins to
say to himself, It is impossible for me to stand in relation to any thing or
event, unless an idea appears in me. From this fact, once noticed, it is but a
step to the theory: all that I experience is only my ideas; of the existence of
a world outside I know only in so far as it is an idea in me. With this theory,
man abandons the standpoint of Naïve Realism which he occupies prior to
all reflection about his relation to the world. So long as he stands there, he
believes that he is dealing with real things, but reflection about himself
drives him away from this position. Reflection does not reveal to his gaze a
real world such as naïve consciousness claims to have before it. Reflection
reveals to him only his ideas; they interpose themselves between his own
nature and a supposedly real world, such as the naïve point of view
confidently affirms. The interposition of the world of ideas prevents man
from perceiving any longer such a real world. He must suppose that he is
blind to such a reality. Thus arises the concept of a “thing-in-itself” which is
inaccessible to knowledge. So long as we consider only the relation to the
world into which man appears to enter through the stream of his ideas, we
can hardly avoid framing this type of theory. Yet we cannot remain at the
point of view of Naïve Realism except at the price of closing our minds
artificially to the desire for knowledge. The existence of this desire for
knowledge about the relation of man to the world proves that the naïve
point of view must be abandoned. If the naïve point of view yielded
anything which we could acknowledge as truth, we could not experience
this desire. But mere abandonment of the naïve point of view does not lead
to any other view which we could regard as true, so long as we retain,
without noticing it, the type of theory which the naïve point of view
imposes on us. This is the mistake made by the man who says, I experience
only my ideas, and though I think that I am dealing with real things, I am
actually conscious of nothing but my ideas of real things. I must, therefore,
suppose that genuine realities, “things-in-themselves,” exist only outside
the boundary of my consciousness; that they are inaccessible to my
immediate knowledge; but that they somehow come into contact with me
and influence me so as to make a world of ideas arise in me. Whoever
thinks thus, duplicates in thought the world before him by adding another.
But, strictly he ought to begin his whole theorising over again with regard
to this second world. For the unknown “thing-in-itself,” in its relation to
man’s own nature, is conceived in exactly the same way as is the known
thing of the naïvely realistic point of view. There is only one way of
escaping from the confusion into which one falls, by critical reflection on
this naïve point of view. This is to observe that, at the very heart of
everything we can experience, be it within the mind or outside in the world
of perception, there is something which does not share the fate of an idea
interposing itself between the real event and the contemplating mind. This
something is thinking. With regard to thinking we can maintain the point of
view of Naïve Realism. If we mistakenly abandon it, it is only because we
have learnt that we must abandon it for other mental activities, but overlook
that what we have found to be true for other activities, does not apply to
thinking. When we realise this, we gain access to the further insight that, in
thinking and through thinking, man necessarily comes to know the very
thing to which he appears to blind himself by interposing between the world
and himself the stream of his ideas. A critic highly esteemed by the author
of this book has objected that this discussion of thinking stops at a naïvely
realistic theory of thinking, as shown by the fact that the real world and the
world of ideas are held to be identical. However, the author believes himself
to have shown in this very discussion that the validity of “Naïve Realism,”
as applied to thinking, results inevitably from an unprejudiced study of
thinking; and that Naïve Realism, in so far as it is invalid for other mental
activities, is overcome through the recognition of the true nature of
thinking.
1 Knowledge is transcendental when it is aware that nothing can be asserted directly
about the thing-in-itself but makes indirect inferences from the subjective which is known
to the unknown which lies beyond the subjective (transcendental). The thing-in-itself is,
according to this view, beyond the sphere of the world of immediate experience; in other
words, it is transcendent. Our world can, however, be transcendentally related to the
transcendent. Hartmann’s theory is called Realism because it proceeds from the subjective,
the mental, to the transcendent, the real. ↑
VI
 HUMAN INDIVIDUALITY
Philosophers have found the chief difficulty in the explanation of ideas in
the fact that we are not identical with the external objects, and yet our ideas
must have a form corresponding to their objects. But on closer inspection it
turns out that this difficulty does not really exist. We certainly are not
identical with the external things, but we belong together with them to one
and the same world. The stream of the universal cosmic process passes
through that segment of the world which, to my perception, is myself as
subject. So far as my perception goes, I am, in the first instance, confined
within the limits bounded by my skin. But all that is contained within the
skin belongs to the cosmos as a whole. Hence, for a relation to subsist
between my organism and an object external to me, it is by no means
necessary that something of the object should slip into me, or make an
impression on my mind, like a signet-ring on wax. The question, How do I
gain knowledge of that tree ten feet away from me, is utterly misleading. It
springs from the view that the boundaries of my body are absolute barriers,
through which information about external things filters into me. The forces
which are active within my body are the same as those which exist outside.
I am, therefore, really identical with the objects; not, however, I in so far as
I am subject of perception, but I in so far as I am a part within the universal
cosmic process. The percept of the tree belongs to the same whole as my
Self. The universal cosmic process produces alike, here the percept of the
tree, and there the percept of my Self. Were I a world-creator instead of a
world-knower, subject and object (percept and self) would originate in one
act. For they condition one another reciprocally. As world-knower I can
discover the common element in both, so far as they are complementary
aspects of the world, only through thought which by means of concepts
relates the one to the other.

The most difficult to drive from the field are the so-called physiological
proofs of the subjectivity of our percepts. When I exert pressure on the skin
of my body, I experience it as a pressure sensation. This same pressure can
be sensed as light by the eye, as sound by the ear. I experience an electrical
shock by the eye as light, by the ear as sound, by the nerves of the skin as
touch, and by the nose as a smell of phosphorus. What follows from these
facts? Only this: I experience an electrical shock, or, as the case may be, a
pressure followed by a light, or a sound, or, it may be, a certain smell, etc. If
there were no eye present, then no light quality would accompany the
perception of the mechanical vibrations in my environment; without the
presence of the ear, no sound, etc. But what right have we to say that in the
absence of sense-organs the whole process would not exist at all? All those
who, from the fact that an electrical process causes a sensation of light in
the eye, conclude that what we sense as light is only a mechanical process
of motion, forget that they are only arguing from one percept to another,
and not at all to something altogether transcending percepts. Just as we can
say that the eye perceives a mechanical process of motion in its
surroundings as light, so we can affirm that every change in an object,
determined by natural law, is perceived by us as a process of motion. If I
draw twelve pictures of a horse on the circumference of a rotating disc,
reproducing exactly the positions which the horse’s body successively
assumes in movement, I can, by rotating the disc, produce the illusion of
movement. I need only look through an opening in such a way that, at
regular intervals, I perceive the successive positions of the horse. I perceive,
not separate pictures of twelve horses, but one picture of a single galloping
horse.

The above-mentioned physiological facts cannot, therefore, throw any light

on the relation of percept to idea. Hence, we must seek a relation some
other way.

The moment a percept appears in my field of consciousness, thought, too,

becomes active in me. A member of my thought-system, a definite intuition,
a concept, connects itself with the percept. When, next, the percept
disappears from my field of vision, what remains? The intuition, with the
reference to the particular percept which it acquired in the moment of
perception. The degree of vividness with which I can subsequently recall
this reference depends on the manner in which my mental and bodily
organism is working. An idea is nothing but an intuition related to a
particular percept; it is a concept which was once connected with a certain
percept, and which retains this reference to the percept. My concept of a
lion is not constructed out of my percepts of a lion; but my idea of a lion is
formed under the guidance of the percepts. I can teach someone to form the
concept of a lion without his ever having seen a lion, but I can never give
him a living idea of it without the help of his own perception.

An idea is therefore nothing but an individualised concept. And now we can

see how real objects can be represented to us by ideas. The full reality of a
thing is present to us in the moment of observation through the combination
of concept and percept. The concept acquires by means of the percept an
individualised form, a relation to this particular percept. In this
individualised form which carries with it, as an essential feature, the
reference to the percept, it continues to exist in us and constitutes the idea
of the thing in question. If we come across a second thing with which the
same concept connects itself, we recognise the second as being of the same
kind as the first; if we come across the same thing twice, we find in our
conceptual system, not merely a corresponding concept, but the
individualised concept with its characteristic relation to this same object,
and thus we recognise the object again.

The idea, then, stands between the percept and the concept. It is the
determinate concept which points to the percept.

The sum of my ideas may be called my experience. The man who has the
greater number of individualised concepts will be the man of richer
experience. A man who lacks all power of intuition is not capable of
acquiring experience. The objects simply disappear again from the field of
his consciousness, because he lacks the concepts which he ought to bring
into relation with them. On the other hand, a man whose faculty of thought
is well developed, but whose perception functions badly owing to his
clumsy sense-organs, will be no better able to gain experience. He can, it is
true, by one means and another acquire concepts; but the living reference to
particular objects is lacking to his intuitions. The unthinking traveller and
the student absorbed in abstract conceptual systems are alike incapable of
acquiring a rich experience.