Why shouldn't I go mad?

In Fallen London, what are the disadvantages to going mad due to high Nightmares? The game says that I'll get trouble at Nightmares 5 and "something bad may happen" if it gets to 8. What's the bad thing, and is it worth spending Echoes on laudanum to keep it away or to keep my Nightmares below 5?

Solution 1:

There are four disadvantages to going to A state of some confusion/the Royal Bethlehem Hotel:

1. All of the normal storylets there have a chance of damaging your four main qualities (Watchful, etc.).
   2. Most of the Opportunities don't damage your four main qualities. There are a few that can, and once you learn which ones they are, you should be able to avoid them. The auto-fire (red-bordered) cards are entirely good: all decrease your Nightmares, and a few will give you a minor item or quality increase.
2. On exiting the place, you lose 5 change points of each Recurring Dreams of... quality. They're uncommon to pick up in the first place, so it's a pain to lose some of that progress. (It's about 5 cards' worth of progress.)
3. All of your normal Opportunities are discarded. They'll probably come around again, but it can be a pain if you've been trying to hold onto a card or two.
4. There is very little to gain in a state of some confusion. You can pick up a little Walking the Fallen Cities and perhaps a few relics of one of the cities, but you're going to spend most of your actions simply decreasing your Nightmares, at a rate of 1-3 change points per action. This is much slower than drinking laudanum, but at least it's free.

On the other hand, if you have any Memories of Light, then you'll go to the Mirror-Marches (a.k.a. Parabola) instead. It has most of the same disadvantages as the State of Some Confusion, with three main differences:

1. There are no ways to damage your four main qualities.
2. There are more ways to gain a little more Nightmares; sometimes through a failed luck check, sometimes through choosing particular storylets. Again, you'll figure out which ones these are and avoid them.
3. Instead of losing 5 change points of every Dreams quality, you lose 10 change points of the single quality Having Recurring Dreams: Is Someone There?

Once you hit Nightmares 5, you'll see a new Opportunity card that you can't discard: The Merry Gentleman. Greeting him will increase your Nightmares, and ignoring him has a chance of decreasing your Nightmares by one change point. Spending Fate/Nex on the Merry Gentleman, along with the gift of a diamond, can eliminate your Nightmares entirely. The Merry Gentleman, then, will either clog up your hand, or (very slowly!) increase or decrease your Nightmares. At Nightmares 6, you'll also see a different set of Dreams cards, that increase your Nightmares significantly (about 3 change points?) and don't give you any Dreams qualities, which also can't be discarded. Once you hit Nightmares 5, getting to Nightmares 8 will happen much faster if you're not careful.

There aren't any other disadvantages, so if you can put up with the above troubles, going mad isn't a serious problem.

Solution 2:

When you reach Level 8 of Nightmares, you officially become mad, and are checked into the Royal Bethlehem Hotel. This is Not A Nice Place, but it can be escaped from through various storylets that reduce your Nightmares, for a cost. Considering the impact this has on impeding your story, you may not want to go here - or, considering the quality of writing, you may wish to visit once just to see the sights.

Similar areas exist for becoming too Wounded, becoming too Scandalous, and becoming too Suspicious.