This section is from the book "Dream Psychology", by Maurice Nigoll. Also available from Amazon: Dream psychology.
In the morbid and pessimistic person there is something wrong with the fantasy-building system. It does not furnish a constant supply of pleasant and beneficial illusions, but it seems in some cases to work in an opposite manner. The fantasies it constructs are negative. They increase the difficulties of reality instead of masking them. A man in whom fantasy has this form is in a state of continual under-compensation on conscious levels. Let me take an example. A man was called upon to take up a business post with considerable responsibilities. He was of the under-compensated type. Fantasy did not immediately present him with a picture of a successful career, of himself as rising swiftly to a position of great importance in which he would control the destinies" of thousands of people and handle immense sums of money. On the contrary, it showed him a vision of tremendous responsibilities which he would be unable to meet. He saw himself as a total failure. His fantasy expended itself in building up images of what people would do and say when defeat came.
Now at this time he experienced a dream which I will give here, because it is possible to extract a meaning from it without any elaborate theorizing about symbolism or interpretation. " I was behind the scenes in a large theatre. The second act was about to begin and it seemed that I was to take the leading part in it. I was very upset at this discovery, for I had no idea what I was supposed to do. The other actors seemed confident, however, and told me that I was to dress up in the costume of a pirate, with sea-boots, frogged coat, pistols, cocked hat, and cutlass. Then I seemed to be in this costume. I swaggered on to the stage brandishing my cutlass and using strange sea-oaths. I was a little timid, but felt sure that if I made sufficient noise and showed that I didn't care what the audience thought I would pull the part oft successfully." In this dream we might see an influence that is compensatory to the actual fantasy in consciousness. The dreamer, instead of being a shrinking, pessimistic, dubious character, is shown in the part of a swaggering, blustering, self-assertive pirate. The picture is painted in high lights, which form a striking contrast to the half-tones in consciousness. With the deeper symbolism we are not concerned here.
Now if we consider the conscious fantasy of the man concerning the business post, and the overdrawn character in the dream, we might come to the conclusion that they are both psychic products neither of which expresses the right attitude for him in this matter. Fantasy is too negative, the dream is too positive. They are at opposite poles. Truth lies somewhere between them. When, therefore, we say that the system responsible for the dream works against the system responsible for fantasy it must not; be thought that they are antagonistic so much as paradoxical. And the paradox consists in the fact that the dream and the fantasy seem to centre round some ideal mean. Let us suppose that the fantasy had been very near to the correct attitude that the man should have taken up. Then, theoretically, the symbol of the pirate in the dream would have undergone modification because there would have been no psychic necessity to have called it into existence. In other words, there would have been nothing so extreme as a pirate in the dream.
The following case will serve as a further illustration. A married woman received news of an extremely depressing nature. She was of the under-compensated type. For her, life was always serious, and the news produced a mood of extreme despair. She went to bed with a fantasy in her mind in which life appeared as a black picture of hopelessness. All effort seemed vain. The only condition worth thinking of was total extinction. She experienced a dream of a peculiarly vivid character. " I was seated under cover of something which seemed to be a table, and gradually became aware that a figure was approaching me. It was a man. He came from the side so that I could not see him clearly, but I felt his presence very distinctly. He seemed to radiate an atmosphere of love, which increased in strength as he approached. I became filled with an ecstasy of peace and joy. The feeling was so strong that it remained with me after waking up and lasted for several days."
In this dream we can see a concentration of those emotions that were lacking in her conscious life. The compensatory effect, moreover, was not transient, but persisted for some time. Without probing the symbolism, we can see from the most superficial point of view evidence of compensation.
 
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