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The relationship between fantasy and reality in Freudian theory is a complementary yet paradoxical one. On the one hand, fantasy has been construed as a vehicle for self-deception, standing in contradistinction to the objective appreciation of external reality. Fantasy can serve as a substitute for external reality that denies, remodels, and replaces an objective perception of external reality when that reality proves to be unacceptable. On the other hand, fantasy has been understood as constituting a symbolic description of external reality which represents actual events. In this model, fantasy, through concrete symbolization, reflects a mode of apprehending external reality through the use of imagery and metaphor.
The question arises as to how fantasy can represent both a self-deception and a valid metaphorical description of reality. Freud formulated the resolution of this paradox in his theory of mental life as a compromise formation between the conflicting forces within the mind. Thus, fantasy involves a compromise between the way one wishes reality to be and the way it actually is and has been. The paradox that remains is that, if all aspects of mental life are constituted by compromise formations, then what we take to be objective reality can never be construed as being a purely objective observation but must inevitably be in part a by-product of wishful thinking. This line of reasoning led Freud to the discovery of the ubiquitous presence of the subjective in what we take to be objective. The purpose of this paper will be to examine how Freud grappled with this issue in both his theorizing and his clinical practice.