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Zepf argues that there is currently no consensus regarding the definition of psychical reality. He notes that some authors have abandoned Freud's definition as anachronistic, while others have come to varying conclusions about the real meaning of Freud's definition of psychical reality.
Freud, according to Zepf, defines psychical reality as the unconscious, a mental reality no less real than physical reality, and like physical reality, not completely knowable due to the limitations of our sense organs and the fact that our “perceptions are subjectively conditioned” (p. 200). The unconscious, according to Zepf's take on Freud's definition, when viewed from the outside contains “thing presentations that have lost the word presentations corresponding to them” (p. 203). When these thing presentations are again connected to words, it is in the form of a countercathexis of substitutive or intermediate thoughts that are no longer part of psychical reality, but are instead part of subjective experience in which the “real,” unconscious psychical reality is “mystified” (p. 206).
Zepf agrees with Michel's proposal that psychical reality is the inner source of subjective experience, in the same way that external reality is the outer source of subjective experience (p. 206). Zepf argues for keeping Freud's definition of psychical reality and details how it relates to issues of constructivism and memory in psychoanalysis.