“All right," said Susan. "I'm not stupid. You're saying humans need... fantasies to make life bearable."
REALLY? AS IF IT WAS SOME KIND OF PINK PILL? NO. HUMANS NEED FANTASY TO BE HUMAN. TO BE THE PLACE WHERE THE FALLING ANGEL MEETS THE RISING APE.
"Tooth fairies? Hogfathers? Little—"
YES. AS PRACTICE. YOU HAVE TO START OUT LEARNING TO BELIEVE THE LITTLE LIES.
"So we can believe the big ones?"
YES. JUSTICE. MERCY. DUTY. THAT SORT OF THING.
"They're not the same at all!"
YOU THINK SO? THEN TAKE THE UNIVERSE AND GRIND IT DOWN TO THE FINEST POWDER AND SIEVE IT THROUGH THE FINEST SIEVE AND THEN SHOW ME ONE ATOM OF JUSTICE, ONE MOLECULE OF MERCY. AND YET—Death waved a hand. AND YET YOU ACT AS IF THERE IS SOME IDEAL ORDER IN THE WORLD, AS IF THERE IS SOME...SOME RIGHTNESS IN THE UNIVERSE BY WHICH IT MAY BE JUDGED.
"Yes, but people have got to believe that, or what's the point—"
MY POINT EXACTLY.”

Terry Pratchett, Hogfather

Humans make up people, objects, things, all the time. We observe a system that we don’t fully control, and then jump to assuming some underlying real thing making it work and function.

Two obvious examples come to mind, one mostly a relic of the past, another very much a part of the present:

Polytheistic religions, where every phenomenon is literally explained by a hallucinated person: god, nymph, djinn…
Hidden entities theories in science, where the phenomena are often clarified and explained through the assumption of unobservable entities, like the fields of field theories, the aether in pre-relativity physics, and the strings and branes in string theory.

Yet our predictive hallucinations are far more prevalent than that!

When reading a novel or playing a game of D&D, we could directly infer the next event to come from the tropes and the psychology of the author, but we tend to naturally hallucinate a whole coherent world with imagined people as if it existed really, and predict the future of the story based on that.
In matters of politics, we could directly model the status games that are being play, like immoral mazes and simulacra levels attempt to, but we tend to naturally hallucinate issues for which we believe we are fighting, like immigration and economy, even though we mostly are playing the status game and often have different opinion about the real world complex systems these words are supp

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Building Blocks