I’m using “psychosis” in the sense of the third factor in Hans Eysenck’s personality model, but it may be considered interchangeable with associative horizon.
General psychosis can be defined as any time our brains take one or two inputs and “jump to conclusions”. It can occur any time the inductive faculties are relatively heightened compared to the deductive faculties, such as when the frontal lobe is depressed and the occipital lobe is not. Depressants that disproportionately affect the frontal lobe (like alcohol) will tend to produce heightened psychoticism, as will stimulants that affect the occipital (and possibly parietal and-or cerebellum?). Stimulants to the frontal lobe (caffeine) will have the opposite effect.
A great example of this occurs in a REM-induced hypnopompic state, during which the amygdala is active and the frontal lobe is depressed. The firing amygdala acts as an input here, saying “something scary is happening”, and the mind invents a situation that could be as scary as the amygdala is saying it must be. A man with a knife leaning over the bed, for instance. The inductive faculty of the mind is running far ahead of the logical or perceptual faculties, so that the person does not immediately notice logical contradictions in the hallucination- such contradictions, for instance, as the absence of any real perceptions (sight, smell, sound) of the would-be murderer.
This state doesn’t last because the frontal lobe eventually wakes up and points out contradictions in the illusion, which make it unbelievable. The pattern-forming imagination is forced to agree that an impending attack is a poor explanatory model for an empty room and a growing sense of relief (as the amygdala goes back on standby).
It is very common for the more believable hallucinations to vanish upon (apparent) contact. I often hallucinate small spiders in my bedsheets when I wake up in this state. This is believable because it is difficult to track a small spider with one’s eyes in near-dark conditions, so any moving shadow will do the trick, and when I’m trying to kill a spider in my bedsheets a lot of little moving shadows are unavoidable. If these spiders contact my skin they invariably disappear because I don’t feel anything, and even my powerful imagination can’t simulate that tickling feeling. I even catch myself reasoning through this a few seconds later to convince myself that there was no spider in the first place, but this is just my conscious mind catching up with what my unconscious mind already concluded: there was no spider, and we’ve been through this before.
Sleep deprivation is another example of increased psychoticism, because we dream somewhat while awake. Hence the greater tendency to small hallucinations like seeing something in the corner of one’s eye, or hearing one’s name in the white noise of a jabbering crowd.
Nikola Tesla might be the best-documented example of an extremely psychotic mind, tempered by comparable intelligence and conscientiousness:
Tesla related in his autobiography that he experienced detailed moments of inspiration. During his early life, Tesla was stricken with illness time and time again. He suffered a peculiar affliction in which blinding flashes of light would appear before his eyes, often accompanied by visions. Often, the visions were linked to a word or idea he might have come across; at other times they would provide the solution to a particular problem he had encountered. Just by hearing the name of an item, he would be able to envision it in realistic detail. Tesla would visualize an invention in his mind with extreme precision, including all dimensions, before moving to the construction stage, a technique sometimes known as picture thinking. He typically did not make drawings by hand but worked from memory. Beginning in his childhood, Tesla had frequent flashbacks to events that had happened previously in his life.
Edit: Coupla interesting links.
And here’s a reminder that there seems to be a psychotic genius switch that flips when the brain has decided to turn off childhood eidetic mode (more on which later) and begins to store memory semantically.