Danny and Pilon enter the bigger of the two houses, which is rather run-down, with weeds in the yard. Pilon is delighted, but Danny seems daunted by the responsibility of ownership and says he would sooner it was Pilon who owned the house. Danny goes to town and finds out to his annoyance that it will take a three-dollar deposit for the water company to turn on their water. Neither Danny nor Pilon has three dollars, and if they did, they would spend it on wine, not utility deposits.
That evening, Danny collects some wood and sends Pilon out to get something for dinner. Pilon captures and kills a chicken in the woods. He picks and dismembers it and puts it in his pockets, and returns home. He and Danny build a fire and cook the chicken. Pilon suggests that Danny rent his other house, adding that he will rent it himself. They agree on a rent of fifteen dollars a month. Pilon, except for his years in the army, has never possessed fifteen dollars in his life, but he does not worry about it, because the rent is not due for a month and he thinks that anything can happen during that time. They spend the rest of the evening drinking wine, and then fall asleep on the floor.
Pilon goes to live in the other house. He is pleased with himself because by renting a house he has risen in the social scale. As for the rent, Danny never asks, and Pilon never pays, since he never has any money. The two friends spend much time together. One night a man gives Pilon a dollar to buy some ginger ale because the hotel has none. Pilon buys wine instead and also takes two plump girls to Dannys house. As they drink, Danny and Pilon get into a fight, while the girls shriek. Danny butts one of the girls in the stomach, and she leaves, while the other girl follows her, stealing two cooking pots. Danny and Pilon complain about the perfidy of women, and then quarrel and fight again.
Months pass. Pilon worries about the rent and actually does a whole days work and earns two dollars. He intends to give the money to Danny but buys wine instead, convincing himself that that is a better way to pay his debt. He feels pure and at peace as dusk falls, but as he walks on to Dannys house, the desire to drink all the wine himself grows.
As darkness falls, he meets his friend Pablo, who has been paroled from jail. Pilon and Pablo go back to Pilons house, where they drink two gallons of wine. Pilon hits on the idea of letting Pablo rent part of his house, for fifteen dollars a month. Pablo agrees, and Pilon is relieved. If Danny ever asks him for the rent, he can say that he will pay when Pablo pays, although he is pretty sure that Pablo will never pay.
Like the knights of the Round Table, Dannys friends suffer from various temptations that threaten to lead them away from their true values. In Chapter II, for example, Pilon is tempted by the prospects of elevating himself in the social scale of Monterey by becoming a man who rents an entire house. He longs for this rise in status, which leads him away from the simple generosity and friendship involved in sharing Dannys house.
Once again, the philosophy of the men is revealed. They like to keep their lives simple, free of possessions. As Pilon puts it, after he removes some breakable items from the bedroom, “It is not good to have so many breakable things around . . . When they are broken you become sad. It is much better never to have had them.? The men dislike anything that connects them materially to the wider social system. They will not pay three dollars to the utility company that would enable them to have running water. They would sooner have wine, because wine enables them to enjoy their lives more fully, without any monetary contracts and obligations.
Chapter III shows how they are willing to observe some of the outer forms of the usual structures of society, but without any of its substance. Danny and Pilon agree that Pilon will pay fifteen dollars for rent, for example, but neither of them really expects any rent to be paid. The same principle is repeated involving Pilon and Pablo.
Also, in Chapter III, Pilons reasoning process is typical of what happens in many episodes in the book. Faced with the unpleasant prospect of dealing with real money and having to pay rent to Danny, he convinces himself that it would be much better for Danny to receive a gift of wine than actual cash. Cash would not show how warmly he regards his friend. And then when Pablo comes along, it is obviously much more generous of Pilon (or so he convinces himself) to share the wine with Pablo, and to drink generous amounts of it himself, than to meet his obligation to Danny. In other words, the men tend to behave in ways that are to their own advantage, while convincing themselves that they are acting from the purest of motives, and with the welfare of the other person in mind. And because this is all presented in a gentle comic spirit, the reader smiles, not willing to condemn the characters for their specious logic.