Cynthia Muldoon’s beauty puts Birdboot in a trance. Mesmerized, he hints that he will leave his wife Myrtle, never mind those who regard him as “an infatuated old fool.” While Birdboot pronounces his spell of love, Moon drones on about Higgs. They take turns speaking, as if in dialogue, but like previous sections, each is in fact in his own soliloquized world. When Moon blurts out, “Sometimes I dream that I’ve killed [Higgs],” the men are broken of their spell and return to their professional task of reviewing the play. Birdboot says that Cynthia’s performance is “one of the summits in the range of contemporary theater,” a phrase that he will repeat several times in the coming pages. Already Birdboot has moved on from Felicity to Cynthia, emphasizing his philandering tendencies.
Birdboot predicts that the madman is Magnus, while Moon shares a bombastic analysis. He asks, “...does this play know where it’s going,” and then later on, “I think we are entitled to ask—Where is God?" Birdboot is taken by surprise. “God?” he asks and looks into his program for a character by that name.
The second act of the play-within-a-play commences with a third radio announcement. The search for the escaped madman has narrowed to the immediate vicinity of Muldoon Manor, but under current weather conditions the police can’t reach the house. Notably, Simon is absent from the drawing room, raising suspicions about his true identity. Felicity becomes weary but Cynthia seems unconcerned.
Suddenly, the residents in the drawing room hear a “mournful baying hooting,” like the cry of a “gigantic hound.” When the door opens, it turns out to be Inspector Hound, wearing swamp boots and carrying a foghorn. Cynthia and Hound seem to be momentarily infatuated with one another, but it is unclear if the infatuation is romantic.
In a comic series of interactions, Hound asks the residents to explain the trouble, but the residents respond that they have not had any trouble (barring the fact that a madman is on the loose nearby). Confused, Hound asks if they called the police. They say they did not. As Hound heads for the exit, Cynthia says, “I hope you find him,” and from these words, Hound deduces that Cynthia must know something about “him.” He asks her how she learned of the murderer. The residents say they heard a report on the radio, but that they did not know the madman was a murderer — that is, until now.
Hound speculates that the madman holds a “deep-seated” grudge against someone at Muldoon Manor. Otherwise, why would he have escaped to it? The Inspector then offers his interpretation of the madman’s motives. One of the Muldoon Manor residents, he claims, is secretly a man by the name of William Herbert McCoy. When the madman was just a boy, he solicited McCoy for sixpence, to which McCoy responded, “Why don’t you do a decent day’s work, you shifty old bag of horse manure.” Ever since, the madman promised revenge. How Hound knows this backstory, neither we nor the characters are informed.
In the midst of this dialogue, the residents in the drawing room finally spot the corpse that has been laid out on the floor since the start of the play. This new development confirms Hound’s accusation that the madman is a murderer, and Felicity, against Cynthia’s wishes, reveals to Hound that a man matching the madman’s description is in their midst — Simon Gascoyne.
Hound tells Cynthia that the dead body is her husband Albert. Even when Cynthia says that it is not Albert, Hound comically insists that it is, bringing into question the quality of his detective work. Hound exclaims, “one of us ordinary mortals thrown together by fate and cut off by the elements, is the murderer,” and they disperse to look for Simon. When the drawing room clears, Simon strolls onstage, calls out for the others, and then also finds the dead body. Here Birdboot interjects with commentary, predicting, “This is where Simon gets the chop.” And sure enough, a shot fires and Simon falls dead.
Upon hearing the shot, the others reconvene in the drawing room. At first, Hound calls Simon’s death “justice.” But then a question occurs to him: is it possible that Simon arrived at the Muldoon Manor after the murder was committed. Looking at the settee, he shows the others how it could have hidden the body from sight. Now the question is who killed Simon and why? The curtain freezes and applause begins. The Act concludes.
The Real Inspector Hound is a self-conscious play. That is, embedded in the text is an analysis of itself. For example, when Moon offers his bombastic review of the murder mystery, his words seem just as apt for the play itself as for the play-within-a-play. “There are moments,” he says, “when the play, if we can call it that...aligns itself uncompromisingly on the side of life...It is my belief that here we are concerned with what I have referred to elsewhere as the nature of identity.” Although satirical, Moon’s words should not be dismissed as satire alone. The Real Inspector Hound is all about “the nature of identity,” as Moon suggests. Consider the many ways in which this is true: Moon fears that his identity will be defined by Higgs; Birdboot tries to shape his identity as a devoted husband, even though he is surely not; at the Muldoon Manor, nobody’s identity seems secure, as any one of the residents could be the escaped madman.
Thus, Stoppard's play investigates the forces that shape identity. Moon, of course, fears that his whole existence is rendered illegitimate because it is constituted by the absence of the first-string critic, Higgs. But over the course of the play we find out that Moon is not the only character whose identity is shaped by external forces. Birdboot’s and Simon’s reputations for philandering, for example, precede each of them. Cynthia defines herself in relation to her lost husband Albert.
Absurdism reappears in this section, when Moon asks, “Where is God?” The absurdity is two-fold. First, the question of God is one that pulls on the minds of many absurdist writers. The world appears to be a meaningless place, absent of a spiritual being to imbue the world with value. Plays like Waiting for Godot (written by Samuel Beckett, who is mentioned in the play) are obsessed with the question, “Where is God?” and ultimately arrive at the answer “Nowhere.” But for this play, the absurdity also lies in the illogical way Moon brings up the question.
Felicity’s comment that the cry outside “sounded like the cry of a gigantic hound” is a direct reference to The Hound of the Baskervilles, the third of four crime novels featuring Sherlock Holmes and published in 1902. In that novel, the legend of a “fearsome, diabolical hound of supernatural origin” inspires a murder. Since — in this play — the inspector’s name is Hound, and since the play pulls a line directly out of the novel, the reader is prompted to wonder whether there is something sinister about Inspector Hound himself. Is he truly the leader of the country police, or is he more like the diabolical hound from Hound of the Baskervilles? Only time will tell.