You and the whole human race have been a little lost since he wrote the damned texts. So, there’s not really a consensus or standard explanation for what he means by this. Everyone who does research in the area of Kantian metaphysics has their own ideas about what in hell is even going on. If there’s anything that’s certain, it’s this: Kant is definitely not—or at least, believes he is not—saying either of those things. Efforts to say exactly what he is saying, though, tend to collapse into the one or the other. As always, I encourage my dear followers to enter courageously into an engagement with the texts themselves and make up your own minds about what they say, but I know that’s especially challenging in this specific area.
My credentials: back when I was in a PhD programme, I was trying and failing to write about the version of the Transcendental Deduction of the Categories as it appears in the B edition of the Critique of Pure Reason. I have probably read the B Deduction more times and more closely than any living human being. I have a few draft papers from those days, but nothing that was ever published, and I didn’t finish the dissertation before I had to withdraw for mental health reasons.
Kant was the first person to describe his own view as a kind of “idealism.” When he does so, he qualifies it. He draws a distinction between two levels at which we can apply the realism/idealism distinction, which he calls the “empirical” and “transcendental” level. The empirical level is about our perception and experience. It asks: Is our experience an experience of a real world outside of us, or is it some kind of illusion that’s playing in our mind? Kant identifies Leibniz and Berkeley as empirical idealists in this sense, as well as Descartes inasmuch as his view invites skepticism about the external world. Kant insists, expressly and vigorously, that he is an empirical realist. In fact, he seems to be something of a direct realist.
The transcendental level is harder to understand, and in my opinion, Kant probably means something different by it in different places. It’s not really one theory, but multiple, and we should probably treat these as distinct: transcendental idealism about space and time, transscendental idealism about the categories, and transcendental idealism about rational ideas. The point, ultimately, is that we can have a priori knowledge of the world—the actually existing world outside of us—and this cannot be explained if all there is to know about the world has its rational basis in the world itself. So, there has to be some creative or constitutive acts whereby we put the world before us as an object of knowledge, and these acts already determine some of the facts that are true of those objects.
Space and time provide a really interesting example, because I think what Kant is trying to do there is to explain something we now know very well, but only because we learned other ways to talk about it about 100 years after Kant was writing. In my opinion, Kant’s theory of space and time anticipates the theory of inertial reference frames. Think of it this way. The things we observe in space are real, and are really related to one another by their position and distance. Suppose we have two bodies A and B in relative motion. From an observer comoving with B, A appears to be moving. If we ask, “Okay, but is A really moving?”, we have to say the question is meaningless. There is no absolute, observer-independent space. Body A is real, but its state of motion is relative to an observer. In fact, every observer comes equipped with their own “space”—their own frame of reference—in which they can position all physical events at any given moment. That space is something the observer brings, without which they would not be able to make any observations at all, and every observation is an observer-relative “appearance” of the thing they observe. Even more trivially, let’s say we’re standing facing one another, and between us, a body is spinning on the axis running between us. From my point of view, it’s rotating one “way” (let’s say clockwise); from yours, the “other” (counterclockwise). Which way is it “really” rotating? That’s a meaningless question—its rotation appears differently for me than for you. That, I think, is the sense in which Kant says space is “ideal” and concerns only “appearance”—what we now call “observation.”
The categories have a different function, and “idealism” about them means something different, but related. When we talk about things in the world, we find ourselves having to describe them as substances with properties, having actual and possible states, standing as effects of other things as their causes and being causes of further effects of their own. But these concepts don’t come from observation; we couldn’t even begin to make sense of our observations if we didn’t have recourse to these concepts. They are the basic terms in which facts are propositionally articulated and logically interrelated in the first place. Consider the logical quandaries in which we’d find ourselves if we tried to ask, “Do facts exclude their negations?” We wouldn’t be able to do any experiment to learn the answer, because experiments rely on modus tollens—we already need to be able to assume that whatever’s going on in the world, it’s basically logical. So elementary logical functions are something we, as knowing beings, bring to our understanding of the world, without which we wouldn’t be able to have any understanding at all.
On my reading, Kant believes that we can put the whole world into logical interrelation a priori in virtue of being able to construct coordinate systems (my gloss for what he calls the “formal intuition” of space and time), as a kind of ideal structure within which the phenomena of the world become manifest for us. Constructive mathematics explores this framework in its own right, and physics populates it with phenomena with specific qualities and interactions. This allows us to generate knowledge that combines mathematical, conceptual, and empirical knowledge—you couldn’t have the third without the first two.
The rational ideas are a whole other thing yet besides. There are certain things we believe in because we recognize that an iterative inductive procedure never terminates. Traditional arguments for the existence of God assumed an induction from the world as an effect, back through a chain of causes that doesn’t seem to terminate, up to God as the prime mover. Kant thinks this is a fallacy (what we would now call special pleading). But, at the same time, our inductive procedure doesn’t really give us any direct knowledge of any event arbitrarily backward in time (or forward, for that matter). So it is not something we can rely upon for scientific knowledge. To use traditional terms, we get to work with potential infinity, but not actual infinity; to use Kant’s new terminology, we can talk about a given iterative inductive procedure as a “regulative” idea but not a “constitutive” one.
As you can see, none of this has anything to do with a suggestion that natural events don’t really exist. But it’s also saying something much stronger and much richer than just that we need to observe something in order to know anything about it. The specifics of observation introduce something into our experience of the world, and those specifics are not trivial.
I haven’t gotten into the whole question of “things in themselves” and the phenomenon/noumenon distinction. I think all readings of Kant on this topic are wrong that don’t connect to his moral philosophy, and they introduce what might be a fourth concept of “idealism.” But that would take a longer post. The important point is that we’re allowed to think of the world as as something we interpret according to our own intellectual and practical purposes, and we are in some ways constrained in how we do that, but not in all ways, not even in all fundamental ways.