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Sagan explains that science is not just a body of knowledge, but is a way of thinking. Sagan shows how scientific thinking is both imaginative and disciplined, bringing humans to an understanding of how the universe is, rather than how they wish to perceive it. He says that science works much better than any other system because it has a "built-in error-correcting machine".: 27 Superstition and pseudoscience get in the way of the ability of many laypersons to appreciate the beauty and benefits of science. Skeptical thinking allows people to construct, understand, reason, and recognize valid and invalid arguments. Wherever possible, there must be independent validation of the concepts whose truth should be proved. He states that reason and logic would succeed once the truth were known. Conclusions emerge from premises, and the acceptability of the premises should not be discounted or accepted because of bias.
As an example of skeptical thinking, Sagan offers a story concerning a fire-breathing dragon who lives in his garage. When he persuades a rational, open-minded visitor to meet the dragon, the visitor remarks that they are unable to see the creature. Sagan replies that he "neglected to mention that she's an invisible dragon". The visitor suggests spreading flour on the floor so that the creature's footprints might be seen, which Sagan says is a good idea, "but this dragon floats in the air". When the visitor considers using an infrared camera to view the creature's invisible fire, Sagan explains that her fire is heatless. He continues to counter every proposed physical test with a reason why the test will not work.
Sagan concludes by asking: "Now what's the difference between an invisible, incorporeal, floating dragon who spits heatless fire and no dragon at all? If there's no way to disprove my contention, no conceivable experiment that would count against it, what does it mean to say that my dragon exists? Your inability to invalidate my hypothesis is not at all the same thing as proving it true."
Continuing with concepts relevant to the 'dragon in my garage' story, Sagan writes about a patient of John Mack who claimed to have scars on her body which were from encounters with aliens. Sagan writes that if the patient is asked what her scars look like, she is unable to show them because, unfortunately, they are located in the private areas of her body.
Sagan presents a set of tools for skeptical thinking that he calls the "baloney detection kit".: 210  Skeptical thinking consists both of constructing a reasoned argument and recognizing a fallacious or fraudulent one. In order to identify a fallacious argument, Sagan suggests employing such tools as independent confirmation of facts, debate, development of different hypotheses, quantification, the use of Occam's razor, and the possibility of falsification. Sagan's "baloney detection kit" also provides tools for detecting "the most common fallacies of logic and rhetoric", such as argument from authority and statistics of small numbers. Through these tools, Sagan argues the benefits of a critical mind and the self-correcting nature of science can take place.
Sagan provides a total of nine tools in this kit.
Sagan suggests that with the use of this "baloney detection kit" it is easier to critically think and find the truth.
There is a second part to the kit that Sagan gives us. This consists of twenty different logical fallacies that one must not commit when offering up a new claim.
Sagan provides a skeptical analysis of several examples of what he refers to as superstition, fraud, and pseudoscience such as witches, UFOs, ESP, and faith healing. He is critical of organized religion.
In a 2020 interview for Skeptical Inquirer, when Sagan's wife Ann Druyan was asked about the origin of the phrase "baloney detection kit", she said that
It didn't really come from Carl. It actually came from a friend of mine named Arthur Felberbaum who died about forty years ago. He and Carl and I once sat down for dinner together. His politics were very left wing, so Carl and Arthur and I were trying to find common ground so that we could have a really good dinner together. And at one point, Arthur said, "Carl, it's just that I dream that every one of us would have a baloney detection kit in our head." And that's where that idea came from.
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