Chapter 1 of The Knowledge Illusion is titled What We Know. To illustrate how we can believe we know more than we actually do, the authors describe experiments in which people tried to draw a bicycle. Some couldn't draw the pedals and chains correctly.
Deliberation is only a tiny part of what goes on when we think. Most of cognition consists of intuitive thought that occurs below the surface of consciousness.
Chapters 2 and 3 are about why and how we think. We mainly think in order to act. Just as people don't think only by association, people do not always reason via logical deduction. We think about how causes produce effects, what kinds of things disable or prevent effects, and what factors must be in place for causes to have their influence. Rather than thinking in terms of propositional logic, which tells us whether a statement is true or false, people think in terms of causal logic, which incorporates knowledge about how events actually come about in order to reach conclusions. Sometimes people ignore alternative causes when thinking about cause and effect because their mental simulations have no room for them.
Stories may be communal entities, but telling them requires that individuals possess a cognitive system that's up to the task. The cognitive system's ability to represent and reason about causal systems is limited, and we can't as individuals deal with all the complexity of the world. This is surely why stories tend to simplify and sometimes oversimplify events.
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