In one form of a contingency judgement task individuals must judge the relationship between an action and an outcome. There are reports that depressed individuals are more accurate than are non-depressed individuals in this task. In particular, nondepressed individuals are influenced by manipulations that affect the salience of the outcome, especially outcome probability. They overestimate a contingency if the probability of an outcome is high--the "outcome-density effect". In contrast, depressed individuals display little or no outcome-density effect. This apparent knack for depressives not to be misled by outcome density in their contingency judgements has been termed "depressive realism", and the absence of an outcome-density effect has led to the characterization of depressives as "sadder but wiser". We present a critical summary of the depressive realism literature and provide a novel interpretation of the phenomenon. We suggest that depressive realism may be understood from a psychophysical analysis of contingency judgements.