So: what was Chesterton really saying when he wrote this?
"Since the modern world began in the sixteenth century, nobody's system of philosophy has really corresponded to everybody's sense of reality: to what, if left to themselves, common men would call common sense. Each started with a paradox; a peculiar point of view demanding the sacrifice of what they would call a sane point of view. That is the one thing common to Hobbes and Hegel, to Kant and Bergson, to Berkeley and William James. A man had to believe something that no normal man would believe, if it were suddenly propounded to his simplicity: as that law is above right, or right is outside reason, or things are only as we think them, or everything is relative to a reality that is not there. The modern philosopher claims, like a sort of confidence man, that if once we will grant him this, the rest will be easy: he will straighten out the world, if once he is allowed to give this one twist to the mind."
On Sunday March 22d I gave my reasons for believing that much is left unsaid here. The gist of those reasons in shorter form is as follows:
1) This can't really be a 16th century calamity if the earliest possible example is Thomas Hobbes, a man who did no philosophizing at all until well into the 17th century.
2) The supposed calamity is metaphysical in nature, whereas the representative thought attributed to Hobbes is political. So on a little scrutiny, the earliest real example Chesterton offers is Berkeley, who starts writing in the second half of the 18th century. Why, again, the specificity about the silent 16th?
3) My best guess is that the phrase "right is outside reason" is meant to reference Kant, and the turn of the 18th into the 19th century. But it seems an off description, as if Chesterton is punning on the word "right" and winking at us. What is going on?
What happened in the 16th century that may be at the back of GKC's mind? The Protestant Reformation, surely. His underlying line of thought is that the Reformation was wrong, and the cause of all wrongness that has come after. He doesn't simply want to say, "various bad thoughts have been thought since the 16th century, so the Reformation was bad." That would sound naive and, frankly, ignorant. He wants to hint at that same contention while sounding sophisticated and erudite.
But the underlying thought is the naive and ignorant one.