I think it involves both, depending on the situation and how much empathy you feel. In some situations I feel empathy quite strongly and overreact in comparison to other people. But at other times, especially if it's a situation I can't relate to, I will underreact because I won't really know what to say or how to say it.
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but I have plenty of reasons to be bitter towards psychiatrists and the mental health system
By the way, I think I know how you feel, newt (how's that for lack of empathy??! !) When I was a teenager I had this psychiatrist who had a degree from some university in the Bahamas, and was in and out of the system for 2 years. I'm sure some of them are excellent at what they do, but they are not always right.