Hello, I am new here and I couldn't resist replying to this post. To answer the OP, it can be helpful to define "sane" and "insane."
In the real world, insanity means different things depending on the context. Legal insanity is generally about the ability to tell the difference from right and wrong or the ability to understand the consequences of his actions or something like that. By this definition, in the real world, the Joker would not be insane. He knows what he does is illegal, hurtful, and "wrong," but does it anyway.
In clinical use, "insanity" is not really used any more, but he could be diagnosed with some things, like delusions of grandeur, psychopathy, antisocial personality disorder, narcissism, sadism (although I think this is used more in fetishistic terms), obsessive compulsive disorder or even the very lame histrionic or borderline personality disorders, or some other stuff I can't think of right now. I don't think he is psychotic, because he is not "out of touch" with reality.. the furthest he goes is delusional.. but he doesn't hallucinate or hear voices or anything like that.
In the real world, it is perfectly possible to have mental illness and be aware of it, unless you are psychotic. The term for this is "insight." I think the Joker doesn't know if he is insane, only because I don't think it would be consistent with his character to have bothered with gaining "insight." He doesn't know because he doesn't care.
We can speculate how "insanity" is defined in the DC universe. Judging from the population of Arkham Assylum, "insanity" might simply be the desire to obtain what is not possible without the expense of human life. Really though, "insanity" might also just be poorly defined in DC, and the question of "is the Joker insane" is ultimately unanswerable for readers unless you want to rely on the opinions of respectable characters in the comic. In the Devil's Advocate story, Joker seemed confident that he could prove insanity by smashing his own face on to a table. Assuming the Joker is smart (I assume it), and that in most situations he would have been right about how easy it is to "prove" insanity, the term "insanity" is sloppily defined in the DC universe at best. You're insane if you just hurt yourself? That is kinda weak.
I think according to the DC universe, he is insane, because that is pretty much how "reliable" judgements of his character have judged him (except for the case of supersanity) by doctors, Batman, and peers. Unfortunately, "sane" and "insane" were not defined for the readers of the DC universe, so we can't be really sure how these people have come to this conclusion.
Furthermore, blahblah blah blah blah ok im done. heehee!
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