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Today's assignment was Dagon (1919), one of Lovecraft's earlier works. In it, the protagonist finds himself cast adrift upon escape from imprisonment on a ship. He reacts at first with bemusement and curiosity, mixed with evident disgust, which turns with striking swiftness to madness when he finds himself faced with creatures at once appallingly humanoid and even more appallingly other. (I would state that his madness seems precipitated more by the creatures' twisted approximation of humanity than by their alienness.) He descends into a sucking morass of suicidal despair equal parts assuaged and fueled by an addiction to morphine brought on by his attempts at self-medicating in the wake of his fearsome discovery.
The principal difference I see between tales of this genre and those of Lovecraft's Victorian predecessors is the appearance of a sort of naturalistic horror; that is, creatures at once blindingly alien and yet somehow recognizable. Far worse than supernatural beings which the rational reader can easily dismiss as mere phantasm once the story has ended, these beasts resemble us just closely enough to make the reader question, if only for a moment, the possibility of such things existing--if only just below the surface of our carefully rational minds. I can think of no more efficient precursor to madness than that.