Summarized from:
Fabrizio Pregadio, The Taoist Tradition: An Introduction to Teachings, Schools, and Practices
Golden Elixir Press
Zhuangzi — whose name was Zhuang Zhou — probably lived between 370 and 280 BCE. He wrote the "Inner Chapters" (1-7) of the work named after him, which form the first of its three main parts. The two other parts, namely the "Outer Chapters" (8-22) and the "Miscellaneous Chapters" (23-33), contain later writings by different groups of authors.
The Dao
The Dao has its reality and its signsZhuangzi uses here the same terms that appear in a passage of Daode jing (sec. 21) concerning the generation of the world from the Dao: “That essence is supremely real — within there is a sign.” but is without action or form. You can hand it down but you cannot receive it; you can get it but you cannot see it. It is its own source, its own root. Before Heaven and Earth existed it was there, firm from ancient times.
Zhuangzi's view of the Dao is in agreement with Laozi's view. However, Zhuangzi repeatedly brings forth the issue of whether and how the Dao can be known. As the Dao is the absolute, it cannot be made an object; therefore its knowledge cannot be attained by the ordinary mind, which functions by establishing distinctions between "self and other," "this and that," "right and wrong," and other relative concepts (ch. 2; Watson, 36-49). Zhuangzi's analysis of the human mind is in fact a discourse about knowledge: since the Dao is ultimately unknowable through the ordinary mind, there is only one way to know it: Zhuangzi calls it "the knowledge that does not know" (ch. 4; Watson, 58).
The Realized Person
The human ideal of Zhuangzi reflects this view: "The True Man (or realized person, zhenren) of ancient times did not rebel against want, did not grow proud in plenty, and did not plan his affairs . . . [He] was able to climb all the way up to the Way . . . [He] knew nothing of loving life, knew nothing of hating death" (ch. 6; Watson, 77-78). In the Zhuangzi, the theme of "inner freedom" receives more emphasis compared to the Daode jing: freedom from social rules, from ingrained patterns of thought, from "essentialism" (the belief that things have permanent characteristics that make them what they are), and from conventional "self-identity."
The Butterfly Dream
Once Zhuang Zhou (i.e., Zhuangzi) dreamt he was a butterfly, a butterfly flitting and fluttering around, happy with himself and doing as he pleased. He didn’t know he was Zhuang Zhou. Suddenly he woke up and there he was, solid and unmistakable Zhuang Zhou. But he didn’t know if he was Zhuang Zhou who had dreamt he was a butterfly, or a butterfly dreaming he was Zhuang Zhou. Between Zhuang Zhou and a butterfly there must be some distinction! This is called the “transformation of things.”
One of the most famous tales in the Zhuangzi the "butterfly dream" (see inset). The protagonists of this story are not only Zhuangzi and the butterfly dreaming of one another: the third and main actor is Zhuangzi himself as observer of the event and narrator of the tale.
As observer and narrator, Zhuangzi first looks at himself and the butterfly, each produced by the other’s dreams. In his own dream, he is a butterfly, but after waking up he wonders whether, on the contrary, he is the product of a dream seen by the butterfly. If the butterfly is his dream and he is the dream of the butterfly, neither has individual existence: Zhuangzi is the butterfly and the butterfly is Zhuangzi, and their separate identities are only the result of each other’s dreams. In the perspective of Unity—the perspective of Zhuangzi as the observer and narrator—this is in fact what they are: neither Zhuangzi nor the butterfly are separate from one another. Yet, as the observer, Zhuangzi knows that he and the butterfly have distinct individualities: they are two examples of the production of multiplicity from Unity. Zhuangzi calls this “the transformation of things.”
The tale of the “butterfly dream” concerns the absence of personal identity in Unity, and the emergence of personal identity in the forms generated by Unity. It is an example of the shift from "unity" to the "ten thousand things".
Ethics and Government
The Taoist Tradition: An Introduction to Teachings, Schools, and Practices
A concise but comprehensive introduction to Taoist thought and religion
In the "Inner Chapters," the refusal to elevate ethics to a primary principle follows the views of the Daode jing: "The way I see it, the rules of benevolence and righteousness and the paths of right and wrong are all hopelessly snarled and jumbled" (ch. 2; Watson, 45-46). In agreement with this view, Zhuangzi is disillusioned about the possibility of using ordinary ethical virtues as a basis for politics and government: "To try to govern the world like this is like trying to walk the ocean, to drill through a river, or to make a mosquito shoulder a mountain!" (ch. 7; Watson, 93; see also 66-67). For Zhuangzi, the enlightened ruler is the one whose achievements "appear not to be his own doing." Thus "the people do not depend on him . . . [and] he lets everything find its own enjoyment" (id., 94). The speaker of this passage is Laozi himself, whose views on "non-doing" in government are accepted by Zhuangzi.
The Zhuangzi and Later Taoism
The Zhuangzi began to have a noticeable influence on the later Taoist tradition from the 4th century CE, when it became one of the sources of inspiration for the Shangqing (Highest Clarity) school of Taoism. Since then, this work has contributed an impressive number of ideas, concepts, and terms to later Taoist work. These include "fasting of the mind" (xinzhai; ch. 4; Watson, 54-58) and "sitting and forgetting" (zuowang; ch. 6; Watson, 90-91), two expressions that in later Taoism denote methods of self-cultivation, but in the Zhuangzi describe the inner state of the realized person.
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Picture of the "butterfly dream" reproduced from Stephen Little, Taoism and the Arts of China (Chicago: The Art Institute of Chicago, 2000).