The Houyhnhnm society is entirely based on pure and uncorrupted Reason, which serves as the central principle of their life. Every action, law, and social structure is guided by this Reason, and they live in complete harmony with nature, free from emotion, corruption, or selfish motives.
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They are portrayed as beings who act only according to logic and truth, never under the influence of vice or irrational desires.
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As Gulliver explains in Part IV, Chapter 8, the Houyhnhnms are naturally inclined toward virtue and have no understanding of evil in rational creatures. Their ultimate maxim is to cultivate Reason and to be wholly governed by it.
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Since they are incapable of unreasonable behavior, they do not require laws or punishments for crimes.
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They are unfamiliar with lying (which they call "the thing which was not"), greed, or other destructive human vices.
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All their debates and decisions aim at discovering the most logical and truthful solution, always prioritizing the welfare of the entire community.