The situation is that a bank official (Joe Roberts) is running a counterfeiting operation out of an allegedly haunted house and releasing the fake bills through the bank. The house's haunted reputation is expected to keep snoopers away -- how different then than now! -- but the counterfeiters have gimmicked up the place to further discourage intruders. Sheet-wearers and skeleton-suits work shifts scaring folks, while the main stairway is something out of an amusement park; pulling a lever makes the stairs collapse into a slide. Obviously the devil's work.
Buster works at the same bank, and in the first gag to make no sense, he is chauffeured to his job even though he seems to be no more than a teller. In a scene surreally foreshadowing Keaton's own profligate ways, he dips his hand in a glue pot while trying to moisten his fingers and sticks wads of money together in his hapless mitts. The stickiness spreads until four check-cashers form a synchronized chorus line trying to fling the dollars off their palms. Much money is torn apart this way, but is Buster destroying the counterfeits or good currency? Later, when robbers appear with guns drawn, he can barely get his sticky hands out of his pockets to raise them.
Framed for Roberts's crimes, Buster flees to the haunted house, not knowing what awaits there. At the same time, a cut-rate theatrical troupe is driven from their stage after their prop house collapses in mid-performance of Faust, and the actors, including a man in a devil suit, head to the same house. This creates ample opportunity for confusion, but Keaton strangely misses the chance to get much humor out of the fake-ghosts getting scared by the devil-man. Instead, once in the house, he throws away all narrative logic. The haunting is carried out on a ridiculous scale, and he stairs collapse beneath Buster without anyone seeming to control the lever. One moment simply can't happen outside cinema: as Buster watches, two skeleton-men appear to assemble a mannequin from various body parts. Once the head is added, and after an almost invisible edit, they reveal their handiwork as a living, breathing person. No wonder Buster is terrified! And terrified he often is here -- whatever happened to that great stone face?
In fact, Keaton and co-director Eddie Cline want to show off how expressive Buster can be within his self-imposed limitations. His big acting moment comes when he stumbles upon two alleged ghosts with their sheets half-off having a casual chat. The illusion of horror dispelled -- despite that earlier hellacious vision -- Keaton conveys with a purse-lipped sigh his new awareness and anger at both the crooks for pulling a fast one on him and himself for falling for it. From this point he mocks the ghosts -- who don't note the mockery -- by playing traffic cop as they parade through a hallway before finally turning the tables and snatching a sheet to disguise himself and get the drop on Roberts.
Buster's triumph pales before what's probably the short's most famous gag, the topper that comes after our hero has been knocked out in mid-rescue. He envisions a celestial stairway and climbs to the pearly gates, doffing his hat to angels along the way. But St. Peters turns him down, and the stairs become another slide sending Buster all the way down to the infernal region until he wakes up for the actual happy ending. This is often taken as some authorial statement on the futility of Buster's existence, but while Keaton's humor was often sardonically fatalistic -- he ends films with tombstones more than once -- here I think he was just so enamored with the sliding stairs that he wanted to give them an encore on a cosmic scale.
The paradox at the heart of Keaton's cinematic comedy is that however much he strives to make his gags realistic, he also insists that things on screen aren't as they seem. The Haunted House is probably his most blatant exercise of that essential contradiction, but he would play with his own and the audience's misperceptions more subtly and effectively in later shorts like The Goat. Here he's still discovering the potential of cinema and figuring out the rules he wants to play by while also expressing some satirical nostalgia for the old barnstorming theatrical days. He's also imitating Harold Lloyd's Haunted Spooks to some extent, just as Lloyd probably took some inspiration from Keaton's next short, Hard Luck, when making Never Weaken later in 1921 -- but that's a topic for another time. For now, let's concede that getting scared by fake ghosts is beneath Keaton, and that he still got a fairly amusing short out of the concept.
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