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This paper discusses the application of basic theories of family functioning to understanding the syndrome consisting of abnormal-illness behaviour centred around a recompensable illness or injury. It sets out the socio-cultural matrix out of which it arises and postulates that compensation-neurosis may be viewed as a homeostatic response of the family system when major psycho-social requirements are not being met and the family is under stress or in crisis. It looks at two common paradigms of compensation-neurosis as met in the rehabilitation unit of a large hospital, and at the application of the theory, and gives further examples of homeostatic adjustments to meet family requirements such as those of attachment. It also uses group and inter-group dynamics to further clarify the syndrome in psycho-social terms. It goes on the discuss the implications of these theories for prevention and management of this difficult syndrome.

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