Dreams are just stories, and stories need evaluation no different than fiction and historical writing.
Let’s frame this within phenomenology, the study of experience as it appears to consciousness — things like perception, memory, imagination, and emotion. It emerged in the late 19th century, building partly on Kant’s earlier distinction between phenomena—the world as it appears to us through experience—and noumena—things as they are in themselves, independent of how we experience them.
In the Idea of Ideas, we do not need a separate category for each of these experiences. At the base are impressions—the background material of mental life. They become ideas when the mind does things like connecting, organizing, and interpreting. A dream is one of the many ways the mind processes and recombines that material.
Dreams themselves are real. They happen in the material world, produced by a real brain, just as a movie is a real thing playing on a screen. But the story inside is just a story. It can be a rational retelling of the past or wander into fiction. If you dream about yesterday accurately, the dream is a rational reconstruction. If a dragon suddenly lands in your backyard, the dream has shifted into fiction, which falls into the irrational category in the Idea of Ideas.
The important distinction is that the ideas within a dream must still be evaluated individually or as a whole. Dreaming that you flew over Sacramento is evidence that you had that dream. It is not evidence that you flew over Sacramento. And this is key. Dreams are real experiences, but experience and interpretation are not the same thing. The truthiness of a dream in the Idea of Ideas is treated exactly like every other idea: let reality push back.