means of analysis, in order to get a good impression of the productiveness of dream condensation. It is not easy to convince one’s self of the second great change that takes place in the dream-thoughts through the agency of the dream-work. I refer to that process which I have called the dream _displacement_. It manifests itself by the fact that what occupies the center of the manifest dream and is endowed with vivid sensory intensity has occupied a peripheral and secondary position in the dream-thoughts, and _vice versa_. This process causes the dream to appear out of proportion when compared with the dream-thoughts, and it is because of this displacement that it seems strange and incomprehensible to the waking state. In order that such a displacement should occur it must be possible for the occupation energy to pass uninhibited from important to insignificant ideas,—a process which in normal conscious thinking can only give the impression of “faulty thinking.” Transformation into expressive activity, condensation, and displacement are the three great functions which we can ascribe to the dream-work. A fourth, to which too little attention was given in _The Interpretation of Dreams_, does not come into consideration here for our purpose. In a consistent elucidation of the ideas dealing with the “topic of the psychic apparatus” and “regression,” which alone can lend value to these working hypotheses, an effort would have to be made to determine at what stages of regression the various transformations of the dream-thoughts occur. As yet no serious effort has been made in this direction, but at least we can speak definitely about displacement when we say that it must arise in the thought material while the latter is in the level of the unconscious processes. One will probably have to think of condensation as a process that extends over the entire course up to the outposts of the perceptive region; but in general it suffices to assume that there is a simultaneous activity of all the forces which participate in the formation of dreams. In view of the reserve which one must naturally exercise in the treatment of such problems, and in consideration of the inability to discuss here the main objections to these problems, I should like to trust somewhat to the assertion that the process of the dream-work which prepares the dream is situated in the region of the unconscious. Roughly speaking, one can distinguish three general stages in the formation of the dream; first, the transference of the conscious day remnants into the unconscious, a transference in which the conditions of the sleeping state must co-operate; secondly, the actual dream-work in the unconscious; and thirdly, the regression of the elaborated dream material to the region of perception, whereby the dream becomes conscious.