I love discussing this book! I’ve gone back and forth with myself over who is ultimately holding the “flashlight.”
Basically…
Bruce and whoever the Joker was before his acid bath. The asylum is the world in general.
Both make a decision to help them deal with the tragedies life has dealt. The Joker fully embraces chaos; Bruce vows to beat it into submission.
The narrow gap is the small difference between their brands of crazy.
Joker is Guy #1 perspective: Joker crossed the line of sanity without reservation. Bats, on the other hand, is in denial.
“He’s afraid of falling” – Bruce won’t accept that his methods are just as crazy as those of his enemies; to do so would mean he’s more like them than he wants to admit.
Batman is Guy #1 perspective: Bruce is convinced he’s the one who’s taken the right path/made the right leap. If you look at the dialogue immediately before this joke, even after everything Joker has done throughout this story, Batman is still trying to rehabilitate him.
“He’s afraid of falling” - Joker is afraid, or perhaps incapable, of believing that’s possible. Throughout The Killing Joke, he constantly tried to improve his life, only for things to get progressively worse. He’s afraid of taking a chance and believing Batman can save him.
Joker is Guy #1 perspective: Basically, that’s a summary of the Joker’s motivation.
As HCQ put it, Joker wants Batman to play this “game” his way. He wants to show Batman (and the world?) the truth of his perspective: In the end, nothing one does really matters. Life randomly dispenses pain and death and misery, and rewards no one.
Batman is Guy #1 perspective: Basically, what was said before. Throughout this book, Bruce has desperately clung to the belief that the Joker is not beyond redemption.
Bruce is Guy #2 perspective: The second guy’s response is as crazy as the first guy’s proposal.
Pun: Bruce’s response to life’s chaos is as crazy as the Joker’s solution. They’re both nuts.
Joker is Guy #2 perspective: Joker is convinced that if he did try to do things Batman’s way, it wouldn’t be successful.
Pun: Bruce’s efforts to turn him sane are as ludicrous as his efforts to turn Bruce (his brand of) crazy. They’re both nuts.
After that, well… this is where it gets more unclear. I’ve never come to a hard conclusion about whether or not Batman killed the Joker, and I don’t really want to. I prefer the ambiguity!
But I LOVE these panels.
Panel 2: Bruce clutches the Joker for support as he laughs (Y’see, he’s afraid of falling)
Panel 3: Joker extends his palm to Bruce in a “Come on, take my hand” kind of way. (For me, easily one of the most chilling panels in the entire comic.)
Then the “flashlight” goes out. The bridge has been broken.
Who broke it?
If the light/bridge was built by Joker, it represented a path to madness. Joker cutting it off could suggest Batman refused his handshake.
And that’s the twisted joke of it. They both realize they’re crazy, and neither this knowledge nor their efforts has changed a damn thing. It’s like those rings of puddles. Constant ripple effect, no conclusion. Life is chaos and then it kills you.
Or, if that light represented Bruce’s attempt to lead Joker to a saner path, it could suggest he finally gave up. Like HCQ mentioned, Batman realized the futility of it all and turned the light off when Joker was halfway across, either murdering him or, at the very least, abandoning any hope of redeeming him.
EDIT: I mistakenly kept referring to the dudes in the joke as “inmates.” Fixed that. I blame years of comics for making me automatically connect Gothic lunatic asylums to criminals.