For a very long time, TV writers seemed to think that one of the universal signs of mental illness was a total inability to perceive one's self as acting oddly. It's tempting to have a mentally ill person utter such classic Mad Scientist lines as, "They Called Me Mad!, but I'm not mad, they're the ones that are mad!" And certainly, the near sociopathically quirky characters you find on the average Sitcom seem to think themselves perfectly ordinary, and in Real Life, many (if not all) people afflicted by mental illnesses don't realise there's anything wrong with them.
Fortunately, this is not always the case. Few characters can be more fun than the Self-Aware Loon. He's crazy and he knows it. And he's making the best of it. Trying to dissuade him from follow his crazy, broken logic by pointing out his insanity will never, ever work. To him, it will be the sincerest form of flattery.
He may be a Talkative Loon most of the time, but he has his lucid moments, and may even consider his episodes to be a welcome respite from normalcy.
Consequentially, he often gets to say clever lines like, "Well, I think it's a good idea, but then, I'm crazy," "I'm crazy, but I'm not stupid," "I may be insane, but you're crazy" or "Oh yes, I'm insane. And you're stuck here with me."
Mostly characters who have become unhinged by an exceptional ordeal; rarely results from an organic disorder. Often a facet of the Waif Prophet or the Rabid Cop; and frequently a major character component of the Shell-Shocked Veteran and Special Forces military types.
Usually a fun character, and a little cartoonish, though it can also be played tragically (this is how it usually goes when The Mad Hatter's illness is organic in origin) as a character is overcome by the knowledge that he is losing his mind and is powerless to stop it.
Probably something of a convenience for the writer, as, just as is true of race and handicap, when it's the victim making light of their condition, it doesn't come off quite as insensitive.
Some may find it insulting to the families of those who are actually mentally ill. On the other hand, perhaps they can take some solace in a depiction of mild mental illness as something that can be coped with.
Archetype is named for the character from Alice in Wonderland, who, like most of Wonderland's residents, knew just how crazy he was, and had decided to just sit back and enjoy it. Carroll's Mad Hatter is in turn a reference to the tendency of Victorian era hatters to go mad. "As mad as a hatter" was even a common phrase at the time. The actual cause of the phenomena was the presence of mercury in the solution used by hatters to shape and form the felt. The hatter would inhale and ingest trace amount of mercury during his work and eventually suffer from mercury poisoning, leading to dementia and death. Contrary to popular belief, Carroll never actually refers to the character as "the Mad Hatter" in the book; he is simply called "the Hatter".
See also the Reluctant Psycho, who has mental problems. Compare Obfuscating Insanity, when the character pretends to be mad.
Jan Valentine of Hellsing fits the trope, sociopathically so. Despite being the loopy one compared to his brother, Luke, Jan is the superior soldier and sets off the fall of the Hellsing Organization for no real clear motivation except that he thinks it might be fun to do so. Commits magical seppuku while cackling.
Technically, it's Millenium that kills him for divulging information, but even so he goes out screaming, laughing, and flipping the bird.
The Joker from Batman is sometimes depicted this way, as are several other Arkham Asylum patients, including Jervis Tetch - who calls himself The Mad Hatter. Even Batman himself makes neutral-to-positive references to having mental problems.
The Joker has claimed that the only difference between Batman and himself is what their insanity drives them to do.
"He's just one man; dressed like a lunatic and armed to the teeth."
He also once described himself as "a certified, card-carrying, lock-me-up-throw-away-the-key looney!"
Joker: See, there were these two guys in a lunatic asylum... And one night, one night they decide they don't like living in an asylum any more. They decide they're going to escape! So, like, they get up onto the roof, and there, just across this narrow gap, they see the rooftops of the town, stretching away in the moonlight... Stretching away to freedom. Now the first guy, he jumps straight across with no problem. But his friend, his friend daren't make the leap. Y'see... Y'see, he's afraid of falling. So then the first guy has an idea... He says, hey! I have my flashlight with me. I'll shine it across the gap between the buildings. You can walk along the beam and join me! B-but the second guy just shakes his head. He suh- says... He says, Wh-what do you think I am? Crazy? You'd turn it off when I was halfway across!
Funnily enough, Jervis Tech (aka The Mad Hatter) is often portrayed as being afflicted with a serious mental illness (typically schizophrenia) and gets upset if called insane.
Amadeus Arkham pities the poor shades confined to the Euclidean prison that is sanity.
Delirium of the Endless is completely aware that she's insane. She's also aware that everyone else is insane, and that she's sane, and that she's a fish who swims in an ocean of words. With great concentration, she can force herself to align to more or less the same mental frequency that the rest of the universe runs on, but it's implied that it hurts her. Evidently she was once Delight, until some great cosmic truth happened to her and drove her to madness.
Deadpool occasionally describes himself as an "addled moron", although it's never clear how much he's pretending to be stark staring mad and how much of it is actually being stark staring mad.
Depending on the Writer, of course. Considering a couple of times has him with three different thought bubbles going, each with seperate personalities? Not MUCH is pretending during those interpretations.
An actual in-universe reasoning for the changes in "how" crazy Deadpool is: since his healing factor is out of control (his body is somewhat accurately described as "walking talking cancer") even his BRAIN is rewiring itself with some regularity. Of course, then there's the fact that he's one of the few that completely ignores the fourth wall; he may have learned about the fact that he's in a comic book and, while he loves it, he may have been affected.
The Creeper, especially in his later versions where his insanity basically kept Ryder sane or was tempting and fun for him.
Marv from Sin City, who's aware he's borderline psychotic (and considers himself less clever than he really is). "I've got a condition. I get confused." He also worries about "turn(ing) into what they always said [he] was gonna turn into- a maniac, a psycho killer." In fact, when he uncovers the truth, he takes some time to find more evidence, just to be sure his mind isn't playing tricks on him.
Rosy the Rascal, Amy's evil counterpart from an alternate universe in the Sonic the Hedgehog comic series. A mentally unbalanced clingy jealous girl taken to the extreme (she believes the only way to get Scourge (evil Sonic)'s attention is to smash him with her hammer). She seems aware of her insanity (due to a magic ring she used on herself to get Scourge's attention, but which shattered her mind as a result) yet is unconcerned with his fact, as her only focus now is Scourge.
Douglas Adams' Life, the Universe and Everything (the third book in the then-trilogy, but not the last, oddly enough) opens with Arthur Dent and Ford Prefect trapped on prehistoric Earth. Arthur decides to make most of their situation by going mad, but is side-tracked by Ford, who had the same idea first and now wants to tell him at length how much fun he's been having.
"...and then I decided I was a lemon for a couple of weeks. I kept myself amused all that time jumping in and out of a gin and tonic... I found a small lake that thought it was a gin and tonic, and jumped in and out of that. At least, I think it thought it was a gin and tonic. I may (grins crazily) have been imagining it."
They then chase a time-travelling sofa, leading to Arthur happily reflecting on just how fast his slip into insanity was.
Arthur suddenly laughed with unexpected delight. For once his day was going entirely according to plan. Not half an hour ago he had decided to go mad, and now here he was, chasing a Chesterfield sofa across the fields of prehistoric Earth.
Antryg Windrose, from The Windrose Chronicles by Barbara Hambly. This character — influenced somewhat by Tom Baker's Doctor — is very charismatically eccentric, has a reputation for being "dangerously insane", and in deep characterization confesses that he really is mad, from long years of having to sustain beliefs contrary to the reality of others around him.
The lost explorer Gordon Willikers (get it?) from Daniel Pinkwater's The Worms of Kukumlima frequently discusses or makes reference to his insanity. No one questions this even though he's quite lucid and isn't a great deal more eccentric than anyone else in the book. His insanity, therefore, comes across as a mix of an Informed Ability and a Running Gag.
In I Never Promised You A Rose Garden, the inmates at the psychiatric hospital have rules about such things: the disturbed ward gets to refer to themselves as "crazy", "mad", etc.; the less disturbed patients may call themselves "cuckoo" or other euphemisms. (It's an autobiographical novel, by the way.)
Colonel Jax in the short story "Nightingale" freely admits that he has gone mad after being turned into a living artwork representing the horror of war. The sentient hospital ship responsible for his fate, though, seems blissfully unaware of her insanity. (And some readers might agree that she's the sanest personality in the story....)
Moby-Dick: Ahab says, "They call me mad, but I'm demoniac: I am madness maddened."
In Lisa Goldstein's A Mask for the General, a prison psychiatrist tells Layla MacKenzie that the complete economic collapse of the US drove her insane. She rejects that: "I made it [her madness] myself, like a work of art."
Tracy Jordan of 30 Rock is so proud of how crazy he is that he was completely outraged when a tabloid suggested his odd behaviour was due to drug abuse. Tracy felt this constituted "libel" and "character assassination."
In his own words: I'm not on drugs! I'm straight up mentally ill!
Walter Bishop on Fringe takes psychotic drugs at lunch to keep his edge. Walter owns this trope.
Homemade psychotic drugs.
Whenever a new character asks if Walter is crazy, Peter and Olivia just say yes and move on.
The title character of Raines is well aware that the dead people he speaks to are just figments of his imagination. He deals with it with a reasonable degree of equanimity, considering.
1000 Ways to Die's segment "Hats-Off folks" discusses the origin of this trope via the life and death of a hatter named Barnaby, who first goes mad and then dies out of mercury poisoning.
Doctor Steel. "I am crazy. And it's a great load off my mind."
Professor Elemental has gone mad from an excess of tea. "I'm madder than a hatter, and it fires my mic!"
A rare serious example: Richey Edwards of Manic Street Preachers was a great user of this trope, often to devastating effect. The Holy Bible, usually considered to be the band's best album and written mostly by Edwards (roughly 70 percent of the lyrics are his alone), contains a cast of Mad Hatters.
Keith Moon would often refer to himself as "crazy" or "insane", and quite liked his nickname "Moon the Loon".
The Malkavian Clan in Vampire The Masquerade, and their spiritual descendants the Malkovian Bloodline in the ReBootVampire: The Requiem. Although all Vampires lose their sanity over time, these guys start out full of crazy and then some. Their madness may have a mystical explanation, or it may just be the fact that since they live in a total Crapsack World where insanity is inevitable, you may as well skip merrily to bonkers and enjoy yourself.
The Malkavians of Masquerade have a variety of opinions on their madness and the insight it brings. A good chunk of the clan just views them as part and parcel of one another (heck, the clan's formal nickname is "The Clan of the Moon"), whereas a few holdouts (such as Dr. Netchurch in the books, or Alistair Grout in Bloodlines) view themselves as perfectly normal individuals with keen insight into the ways of the world.
This has led to a particularly contemptible sort of player character known as the fishmalk, who is crazy in a way they think is "wacky" but all the other players think is juvenile, stupid, and distracting from the rest of the game. It is named after a bizarre picture of a Malkavian kissing a fish, check it out at that link.
Occasionally played very darkly in Warhammer 40000 as a symptom of corruption by Chaos, particularly by Tzeentch.
And by the good guys. Inquisitors and other Imperial officials occasionally muse that to the average man, doing things like blowing up your own planet to stop the enemy from claiming it, or abandoning millions to die because they aren't worth the cost of life required to save them, are unfathomably evil acts. Yet those who know the true nature of the threats facing the Imperium realize that such atrocities make a chilly sort of sense. "The very existence of the human race is the prize for victory. Our sanity is the sacrifice we make to win that laurel."
Genius: The Transgression: The good Geniuses are the ones who know they're crazy. The bad Geniuses are the ones who think they're totally sane.
Mad Margaret from Ruddigore: "If I were not a little mad and generally silly, I would give you my advice upon the subject, willy-nilly; I would show you in a moment how to grapple with the question, and you'd really be astonished at the force of my suggestion. On the subject I will write you a most valuable letter full of excellent suggestions when I feel a little better, but at present I'm afraid I am as mad as any hatter, so I'll keep it to myself, for my opinion doesn't matter."
Vezon:You haven't truly lived until you have seen the world through the eyes of madness. Why, half the time I don't know if what I see is what's really there, or what I wish was there ... or what I pray, I beg, I plead is not.
In the Touhou game Imperishable Night, when Cute Witch Marisa Kirisame is exposed to "pure" lunar rays, which can drive humans mad, she isn't concerned because, in her own words, "I'm insane to begin with". This is the only time she comes out and says this, however.
Crazy Dave is a good example. Why? because he's Craaaaaaaaaaaaaaazy!
Slak the berserker in Defenders Quest. He gets much more aware of it in the New Game Plus, at one point scolding the party for going on a trip that was his idea in the first place. They really should know better.
Most people in Narbonic. Mad Scientist is a job description, and the mads are perfectly aware of the impossibility of their schemes — leaving the sane characters chagrined when they succeed anyway. Cue great amounts of tropeplay and Shoutouts.
Including the Alice in Wonderland quote, which takes on a darker meaning... After all, Dave is mad!
Kisume in Touhou Nekokayou, who implies that her entire species must be mad for opting to spend their lives in buckets.
Leela in Futurama, "The Sting": "Okay, I'm insane. But I'm still sane enough to know it."
Most of the Looney Tunes gang know how far out-of-kilter they are.
This was practically Daffy Duck's catchphrase in his early days.
Random Person: "That duck's crazy!"
Daffy: "You ain't just whistlin' Dixie!" (maniacal laughter)
Really freakin' creepy example: Tarantulas in Transformers: Beast Wars. It's unclear how much of his lunacy is genuine, and it's been theorized by at least one fan that this is intentional, and he's actually the most lucid among the Predacons. Either way, the attempts at draining vital fluids of other characters, the gleeful sadism, the maniacal laughter all add up to an over-the-top loon who enjoys being an over the top loon, especially when it creeps people out... In his own words:
Tigerhawk(shocked): You're Insane!! Tarantulas(casually): So they say.
Possibly (though not necessarily) true Urban Legend. A man suffers a flat tire while driving by a mental institution one night. He removes the lug-nuts from the tire and places them in the hubcap while he puts the new tire on. A car comes by and hits the hubcap, scattering the lug-nuts, which are impossible to find in the dark. As the motorist frets an inmate from the other side of the fence points out that he can just take one nut from each of the remaining tires. The motorist is impressed, and admits that he didn't think the resident of an asylum would be so lucid. The inmate responds "I'm crazy, not stupid."