Over the coming days, Isabel grows quite close to Madame Merle, who seems to be almost perfect to her—she is graceful, talented, and interesting, and her only fault seems to be that she is so much a social being that she seems to have no inner self. Madame Merle tells Isabel that Americans who live in Europe are displaced—she compares Ralph, whose illness essentially functions as a career and a lifestyle, with a man she knows in Florence, Gilbert Osmond. Osmond, she says, devotes his life to painting and raising his daughter. Isabel asks why Madame Merle seems to dislike Ralph, but Madame Merle replies that Ralph is the one to dislike her—she herself feels nothing about Ralph. Madame Merle confides in Isabel that she feels as though her life has been a failure, because she has no family and no fortune. She says that a person is defined by what she possesses. Isabel disagrees, but when Madame Merle departs Gardencourt, she and Isabel bid farewell as close friends.
Isabel continues corresponding with Henrietta, whose promised invitation to Lady Pensil's manor never materializes. Henrietta now hopes to travel to Paris with Mr. Bantling. Not long after Madame Merle leaves, Isabel is reading in the library, when Ralph enters with an unhappy piece of news: Mr. Touchett has died.
This section involves three important narrative events: Isabel's second rejection of Caspar Goodwood, the introduction of Madame Merle, and the death of Mr. Touchett, which unexpectedly brings Isabel a fortune. The scene with Caspar is interesting for two reasons. First, it reveals what happened in the conversation Isabel had with Caspar before she left for Europe, which James chose to skip over in the opening chapters of the book. Isabel asked Caspar to give her a year in Europe before deciding whether or not to marry him. Now, though it has not been a year since Isabel left Albany, Caspar is impatient for an answer and desperate to be with her. As intimidatingly masculine as Isabel seems to find Caspar, he is also extremely devoted to her and seems to need her presence in order to be happy. Ironically, his rash decision to follow her to Europe rather than waiting a year to see her is rewarded by her forcing him to agree to wait two years before she will even consider the question of whether or not to marry him.
The second interesting feature of the Caspar scene in Chapter 16 is that it provides Isabel another opportunity to defend her independence from a suitor's desire to marry her. She has already rejected Caspar once and then rejected Lord Warburton, but where those past experiences left her feeling confused or sad, this one leaves her feeling exultant and powerful, as though a weight has been lifted from her shoulders. Though Isabel (or James) is never entirely clear about what "independence" means to her exactly, clearly it implies a kind of personal autonomy that would be incompatible with a conventional marriage, in which the wife is expected to be submissive to her husband. By warding off three successive proposals, Isabel has demonstrated her commitment to her personal autonomy, even if she has only a vague idea of what she wants to do with her life.
Madame Merle will soon become an important and sinister character in Portrait of a Lady, and will play an enormous role in Isabel's life by manipulating her into marrying Gilbert Osmond and thereby losing her treasured independence. But in this section, Madame Merle is more an enigma than a villain. Isabel likes her very much, and the redoubtable Mrs. Touchett thinks the world of her. But Ralph, whose opinions the reader instinctively values, does not like her, and this makes it natural to look for her flaws. If the novel explores the opposition between personal independence and social propriety, Madame Merle seems to exist uneasily between the two polarities.
On the one hand, she is an independent woman, accomplished in every grace and extremely popular; she clearly makes her own decisions. But on the other hand, her commitment to popularity means that she seems to observe every social convention; Isabel thinks that she even seems to lack an inner self. In this regard, Merle is Isabel's first introduction to continental Europe—throughout the novel, America represents individualism, Europe represents social convention, and England seems halfway in between. Isabel has moved from America to England, and now has a taste of what she will find in Europe.