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Houyhnhnms lead simple lives, completely devoted to logic and reason. They speak clearly and concisely, act justly and honorably, and abide by simple laws, but fair laws. Every individual knows what is right and wrong, and acts accordingly - for they know no other way. They are a people untarnished by the greedy, politically-motivated, or lustful intentions that Gulliver has observed in humankind. They live clean, peaceful lives, and exist in harmony and contentment. They live by their own golden rule: Cultivate Reason, and be totally governed by it. Their society is so perfect, that indeed they have no concept of a lie, and thus no word to express the action. Their only word for evil is "Yahoo."
Author Jonathan Swift defines Houyhnhnm to mean "perfection of nature." This establishes an important distinction: the horses are uncorrupted by passion, neither basic nor cultivated. For example, they lack a grasp of the concept of charity. They are also never victims of temptation. However, Swift never goes on to suggest that they symbolize perfect human nature. Quite the contrary, they manifest innocent human nature, taking everything in life at face value, feeling little malice or compassion for those outside their society. What they do, say, and think is similar to basic human nature, but the displayed character of the Houyhnhnms is far from Gulliver's own (as much as he wishes to believe they are like-minded}. They are ignorant of many small transgressions which most societies would consider forgivable. An example of this is in their inability to understand lying — or even the necessity for ever doing so.
With the contrasting differences between the Houyhnhnms and Yahoos, Swift establishes a complete spectrum of existence, with each race on an opposite end. The horses are completely innocent-minded, having never (in theological terms) fallen from grace - while the Yahoos seem over-passionate, animalistic, and corrupt by a lack of control over their primal urges and desires. The Houyhnhnms are stone cold reason; the Yahoos are red-hot carnality. In the middle of these two extremes is a luke-warm Gulliver.