The economy in Colorado is collapsing. Nobody has been able to replicate Ellis Wyatt's method of creating oil from shale, and without the Wyatt fields, the companies dependent on them go out of business. Andrew Stockton, the Colorado businessman who operates the country's best foundry, makes a fortune because many businesses convert to coal. However, Stockton suddenly retires and vanishes. Shortly after, Lawrence Hammond, another Colorado industrialist and the last great manufacturer of automobiles, also retires. Dagny is compelled to steadily cut trains on the Rio Norte Line.
Dagny calls Dr. Robert Stadler regarding the motor. Realizing that her quest to find the inventor has reached a dead end, she now hopes to find a scientist capable of reconstructing the motor from its remnant. Dr. Stadler looks at the motor and the remaining pages of the explanatory manuscript; he realizes the extraordinary breakthrough in the field of energy that the inventor made. Dr. Stadler is puzzled why such a mind would waste his time making such practical things as motors. He refers Dagny to Quentin Daniels, a promising young physicist at the Utah Institute of Technology, who has refused to accept a government position.
The government makes a ruling regarding the amount of Rearden Metal that Rearden can sell per customer, and the rulers send a bright young man fresh out of college to Rearden's mills to function as Deputy Director of Distribution. The steelworkers call him the "Wet Nurse." The State Science Institute places an order for Rearden Metal, which Rearden refuses to honor. When a representative from the Institute comes to his office, Rearden begins to realize that the socialist looters depend on his moral consent and that he must not give it to them in the future.
Although he possesses an extraordinary intellect, Robert Stadler holds a mistaken premise regarding the mind's proper role in human life. Stadler is a brilliant theoretical physicist, but he has contempt for the practical affairs of living. He believes that the mind is effective only when dealing with questions of pure science — issues of abstract speculation — such as the research on the nature of cosmic rays that established his reputation. All questions of practical application involve a human element, and Stadler thinks that men are fundamentally irrational. Stadler believes that most humans are driven by impulses and desires, not by the mind. His belief about the nature of humanity is the reason why Stadler was instrumental in founding the State Science Institute. He assumes that people won't voluntarily support science and the mind; therefore, the government must dictate such support. In his view, the ignorant public desires nothing but clever "gadgets" from science — inventions to improve their quality of life. He despises that the public has no regard for the higher concerns of "pure science." He expresses to Dagny his scornful bewilderment that a genius capable of solving the monumental problems of theoretical physics would waste his brains on such a practical device as a motor.
Dagny's response, however, comes from opposite premises. She knows that the motor's inventor applied his mind to the project "because he liked living on this earth." Dagny rejects the premise that reason is valid only when grappling with a "higher" realm of ideas. She understands that creating prosperity on earth is vital. She knows the role intellect played in Rearden's creation of his metal, in her own achievement of building the John Galt Line, and in the inventor's construction of the motor. She recognizes that, although people may often behave irrationally, their survival depends on embracing their rational nature. In time, the public will recognize facts and understand the truth, just as it has come to see the merits of Rearden Metal and the John Galt Line. Humans must be free to use their own minds. Dagny's estimate of man's nature is significantly different than Dr. Stadler's. He believes that mankind is composed predominantly of irrational brutes, but she knows that man is a rational animal.
Dr. Stadler believes in the mind-body dichotomy much like Rearden, although Stadler holds a different form of the belief. The mind, Stadler believes, has its own "higher" realm of theoretical ideas that only the great scientists and mathematicians understand. The body and its animalistic urges rule the "lower" world, and the mind is powerless to control the body and its urges. Dagny understands that Stadler's ideas are mistaken. She argues that the mind is the power that makes man's life on earth possible. Dagny rejects the mind-body dichotomy, believing instead in mind-body integration.
Rearden's growing realization that evil men require some moral consent from their victims — and that the victims must, as their fundamental means of self-protection, withhold such consent — is crucial. As Rearden understands his seminal insight more fully in subsequent chapters, he'll be better able to defend himself against his enemies.
pure, abstract science theoretical studies in math and physics that do not relate directly to the development of practical technologies.
sanction something, such as a moral principle or influence, that makes a rule of conduct or a law binding. Rearden begins to realize that the looters need some type of moral permission from Dagny and himself and that, more broadly, evil men require moral permission from their victims. What the exact nature of this sanction is, he doesn't yet know.