While still visiting with Carry, Lily goes for a walk with Rosedale. Lily considers her past experiences of setting up courtships that never reach their fulfillment in engagement. She steels herself to not ruin her current opportunity with Rosedale.
She tells Rosedale that she will marry him, despite the fact that he has not repeated his proposal. He reveals that he had no intention of repeating the proposal, and she responds that she never meant her initial refusal to seem as if it were a final decision.
Rosedale admits his love for Lily, but also confesses that he does not wish to be associated with the scandal surrounding Lily and Dorset. He tells her that he does not believe the stories that he has heard about the affair, but that if he marries her while she is still surrounded with scandal, he will dash all hopes of societal acceptance.
Rosedale asks Lily why she hasn't attempted to get even with Bertha, and reveals that he knows she possesses the love letters that Bertha had written to Selden. He suggests that she use the letters to blackmail Bertha into backing Lily's aspirations. Such an action would put Bertha and Lily back on equal footing, and would enable Rosedale to marry Lily. Once they are married, Rosedale reasons, his wealth will protect her further from Bertha's scheming. Lily rejects Rosedale's plan, and he guesses that Lily is attempting to protect Selden, the recipient of the letters. Rosedale reminds Lily that Selden hasn't been much of a friend to her since the incident in France.
As Chapter VIII opens, Lily's fears that Bertha is undermining Lily's position with the Gormers are realized. Lily makes an infrequent visit to Gerty, who tells Lily that Silverton has once again taken up gambling and living far beyond his means. He also has been cast away from the Dorsets. Lily confides to Gerty that she hasn't been sleeping well, a condition she attributes to an impoverishment brought on by living with the wealthy. Later, it is revealed that Carry has lined up another position for Lily.
Gerty visits Selden and tells him about Lily's predicament. She asks Selden to assist Lily and he consents. He pays a visit to Lily's hotel only to find that she has moved to the posh Emporium Hotel, where she is now working as a secretary for Mrs. Norma Hatch.
Wharton points out that the walk taken by Lily and Rosedale is ironically the same route taken earlier in the novel by Lily and Selden. At the onset of their walk, Lily arrogantly tells herself that she can transform Rosedale into a man deserving of her companionship.
Rosedale is a pragmatic individual. He tells Lily that he does not believe the stories he has heard concerning Lily and Dorset, but also confesses that "my not believing them ain't going to alter the situation." Later, he tells Lily that he desires social position, defending his admission by labeling his aspirations as a hobby, much as another man desires a stable of racing horses or a picture gallery. He further sums up the attitudes of New York society by telling Lily that, even if she is innocent of the accusations brought against her by Bertha, "Everybody knows what Mrs. Dorset is, and her best friends wouldn't believe her on oath where their own interests are concerned; but as long as they're out of the row it's much easier to follow her lead than to set themselves against it, and you've simply been sacrificed to their laziness and selfishness."
Rosedale's deduction that Lily is protecting Selden when she refuses to use the letters to blackmail Bertha may or may not be true. While Lily harbors a love for Selden, she also appears to reject the plan because of the sinister nature of such an act. While Lily may be vain and shallow, she seems here to be more interested in conducting herself in a proper manner. Another interpretation is that Lily rejects Rosedale's plan simply because it is Rosedale who proposes it. After all, Rosedale is not born to the customs of the wealthy class, and Lily naturally would be indignant toward and suspicious of any plan that he might concoct.
Despite the increasing hardships Lily confronts, Wharton continues to lampoon the wealthy social classes. Upon her realization that her tenure with the Gormers is ending, Lily contemplates the daily chores of the socialite, "drudgeries" that include "card-leaving, note-writing, enforced civilities to the dull and elderly, and the smiling endurance of tedious dinners." While Wharton is making a satirical point, Lily remembers those drudgeries with a degree of nostalgia.
Wharton explains Lily's rejection of Rosedale's blackmail suggestion. Her rejection is depicted as a noble action, albeit one that Wharton describes as the easiest action to take. However, Wharton tells the reader that Lily "had learned to live with ideas which would once have been intolerable to her" simply by listening to Rosedale's offer.
Gerty observes Lily's character, and finds her cousin is still trying to keep up appearances of wealth despite her dwindling financial resources. Gerty recognizes that, "Lily was not of those to whom privation teaches the unimportance of what they have lost." This observation is emphasized when Lily tells Gerty, "I always understand how people can spend much more money — never how they can spend any less!" during their conversation about Silverton's extravagance. She tells Gerty that living with the rich is an expensive proposition, requiring large tips, expensive clothing, and involvement in cards.
The conversation between Selden and Gerty reveals the selfless nature of the latter and the character flaws of the former. Selden has been avoiding contact with Lily due to the scandal with the Dorsets. He also negatively judges Lily for her quick intimacy with the Gormers. He finds it easier to negatively judge her for her patterns of behavior rather than to succumb to his previous feelings of love for her.