On who is saying it
“There is nothing either good or bad, but thinking makes it so.”
Detached from the play this is a tidy piece of philosophy. In the play it is said by a man in a bad state, to two people sent to find out what is wrong with him, about a country he has just called a prison.
That does not make it false. It makes it a thing said by someone using it to explain away a situation that is genuinely dangerous. The idea is sound; the moment it arrives is often the tell.