Basically, I know the difference between what is real and what is not because the fact that I am able to ask questions between reality and fantasy means that I have the ability to distinguish them. Based on Rene Decartes meditations, since I am able to understand, doubt, and deny means that I exist. Since I am able to doubt that something is real, it means there’s something inside of me that does the doubting, which in this case, is my mind.
More specifically, I know that dreams are only dreams simply because I possess knowledge that enables me to perceive between being in a dream state and being in the real world. In addition, following George Berkeley’s philosophical arguments, I am able to obtain knowledge because I am able to perceive objects and other things which I can determine to be real or not. Likewise, I can always differentiate between dreams and reality because I can compare them to what I know to be real. For example, if I see a three-headed monster or a ghost, then I can immediately conclude that what I see is not real or only a dream because of the knowledge that these things do not exist or have never been proven to exist.In short, my mind is able to use judgment and reasoning to know what is real and what is not.
My judgment, perception, and use of reason, is mainly based on what I know or, specifically, what I have already seen, heard, or experience. In turn, I am able to use that knowledge to ascertain whether what I am seeing is real or not. Meaning to say, my consciousness of the things or realities around me can imply my own existence and also the existence of objects and things that I see everyday.