Hamas did indeed instruct people not to listen to the "psychological warfare" from Israel, and that they believed the fighting would be short lives and people were at greater risk on the move than they were in their own homes.
It was part of their plan to utilise human shields, not thinking Israel would (or daring them to) fire on civilian homes.
That said, IDF has used human shields fairly recently, and was pretty insistent on their right to use them as effective means, so even the whole morality of human shields doesn't necessarily weigh in Israel's favour.
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