This 'who is dreaming' question is essentially jnana yoga, except it applies while awake as well as while asleep. I don't accept the thesis of jnana yoga, that all the identities are 'false' except for the being consciousness-bliss-one. I think that the capacity to move or extend one's sense of identity is not a mistake, it is an important aspect of who we are, and that trying to stay in the 'enlightened' awareness is the spiritual equivalent of trying to stay stoned all the time. But in any case, whether I'm right about that or not, for me finding the ability to move the standpoint of identity is valuable, and is at the root of most of my 'beyond dreaming' experiences.
In regards to the 'higher self', I think that an important point to be aware of is that the higher self is also limited fallible, however greater it may be than our human personality. I can see the benefit of positing an ideal, eternal, perfect greater self, for the sake of realizing that to a greater degree. However, there's a sort of subconscious megalomania that commonly accompanies that, where a person can't recognize or accept flawed qualities of the 'higher self' for what they are, since the higher self is presumed to be beyond error. Then a person gets stuck on that, because it is very difficult to improve when following an ideal that's also limited.
The way I experience it, my higher self isn't really 'me', it is and it isn't, and this changes to some degree depending on where I'm thinking from, so to speak. 'Higher kin' is a phrase my own muse has used before when referring to it. This deeper identity has connections with other people also, it is theirs as well as mine. But it isn't completely monolithic or uniform. Particular arms of it, so to speak, are more strongly connected with some people than with others.
In the past, I would have one dream every night which did not seem to be made up on the fly. It seemed to be carefully planned ahead of time, and then played like a recording. These dreams were always lucid in the sense that I was aware that I was dreaming, but I would never attempt to interfere with the course of the dream. I almost never have these kinds of dreams now though, as has been discussed in other threads. My point is that there's something involved with the formation of the dream which is not the conscious me, but is not a stream of subconscious mental fluxuations either.
Something that annoyed me about Jung, is many of his beliefs clearly imply some kind of supernatural element, by which I mean factors that are outside of what is currently covered by scientific understanding. But on that question, he always maintained respectability in his field by acting as if everything can be explained by material considerations. For example, he wrote the preface for the Wilhelm/Baynes I Ching translation. The scientifically respectable Jung might say that the hexagram drawings are random, and we're benefitting by reading useful interpretations into them. His entire idea of synchronicity, which is a more general description of the same phenomena, would be explained the same way. However, if you look at specific examples, there's often no way that explanation works, there is clearly some 'action at a distance' which is not a matter of statistics, selective attention, and confirmation bias. He seemed to flip back and forth from one mindset to the other without trying to resolve the contradiction. I can see that there's an upside to leaving some ambiguity that way, but a downside is it also leads people to confuse mental dynamics which are actually distinct.
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