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The concept was first described by a researcher for the BBC, Robert Silvey, with later research by British psychiatrist Stephen A. MacKeith, and British psychologist David Cohen.
Silvey & MacKeith published The Paracosm: a special form of fantasy in 1988, and Cohen & MacKeith published The Development of Imagination: The Private Worlds of Childhood in 1991.
Probably the most famous examples of a paracosm are "Gondal", "Angria" and "Gaaldine" created by Emily, Anne, and Charlotte Brontė, and their brother Branwell.