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 nondepressed 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.