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How long do dreams take? This question has intrigued humanity for many centuries. A traditional answer was that dreams take very little or no time at all, as in the case of Maury's famous dream in which he had somehow gotten mixed up in a long series of adventures during the French Revolution, finally losing his head on the guillotine, at which point he awoke to find the headboard had fallen on his neck. He supposed, therefore that the lengthy dream had been produced in a flash by the painful stimulus. The idea that dreams occur in the moment of awakening has found supporters over the years (e.g., Hall,1981).
We have straightforwardly approached the problem of dream time by asking subjects to estimate ten second intervals (by counting, "one thousand and one, one thousand and two, etc.") during their lucid dreams. Signals marking the beginning and end of the subjective intervals allowed comparison with objective time. In all cases, time estimates during the lucid dreams were very close to the actual time between signals (LaBerge, 1980a, 1985). However, this finding does not rule out the possibility of time distortion effects under some circumstances.
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References
LaBerge, S. (1980a). Lucid dreaming: An exploratory study of consciousness during sleep. (Doctoral dissertation, Stanford University, 1980). (University Microfilms International No. 80-24,691).
LaBerge, S. (1985). Lucid dreaming. Los Angeles: J. P. Tarcher.
Of course, the subjective and highly personal nature of experiencing dreams makes it hard to draw any definitive conclusions about dream time. After all, if someone claims to have experienced 60 years of experience in a 10 minute dream, who are we to tell them that they didn't? Obviously we should approach these claims with a healthy dose of skepticism, but in the end we really just don't have the technology or techniques to refute or validate them.