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To begin with, Freud invoked psychic reality to argue that the memories responsible for symptoms were often partly fashioned by children's wishes. In other words, some causal experiences were not just inflicted; they were structured by preference.
Since psychic reality was a blend of fact and purpose, it could be studied in two ways: one could tease out the influential purposes that create it, for instance, those related to identification, sexuality, guilt and envy; and one could note the basic forms of experience that were built up and later reacted to, such as the Oedipus complex and the primal scene.
But if psychic reality mixes fact and purpose in childhood, why not also in the adult? Transference showed that it does it in adulthood, too. Although it was assumed that perception becomes more accurate with age, transference demonstrated that love is always founded on fantasy; and the burgeoning structural theory ended up saying the same thing about social reality in general. We don't just carry around the memory of a childhood psychic reality; our purposes go right on arranging current experience and helping to define our contemporary world.
If that is the case, then perhaps psychic reality is just the world as perceived; and fantasy is just the way we give meaning to life. That leads to a pretty complicated epistemology. But epistemology isn't what an analyst is concerned with: practical problems pull at his sleeve. One problem is the mind's diffuseness. In its hall of mirrors, mental occurrences jump around on parallel planes of recursive reflection. Subjective states are being pictured objectively, and objective self-images evaluated subjectively. People all at once abstract from their images and image their abstractions, and each of these registrations mixes how things are with how a person wants them to be. It's hard for a therapist to take a principled slice of a layer cake like that.
The human mind also has another feature that bedevils therapists—I refer to it