Why is -1.7 stops the right flash compensation value?

This number originated with Galen Rowell. 

Most nature and scenic professionals use -1.3 to -1.7 stops for their fill flash setting because they are trying to do one thing only: increase shadow detail (an alternate way of saying this: decrease overall scene contrast). Why? Because exposures for slide film needed to be biased to the brightest object in the scene (i.e., overexposure of slide film is VERY bad). Since slide film (and early DSLRs) have a limited dynamic range they can record with reasonable detail, if you set your exposure to put the highlight at the white point, you sometimes lose shadow detail. 

The purpose of the fill flash in this case, therefore, is to raise the film's response curve at the shadow point without further blowing out the detail. The -1.3 to -1.7 values are often just enough to pull another "stop" of useful shadow detail into an exposure without adding unduly to the highlight exposure. Films like Velvia were especially troublesome, as they have a steeper drop-off to black, and lose shadow detail faster (and this leads some to say Velvia is a high contrast film, which it's not). Ditto older DSLRs with limited dynamic range. If you're using print film, you probably should opt the other direction: use as much flash you want, and don't worry about overexposure. That's because overexposure of a negative increases useful print densities (up to a point).

If you shoot people (weddings, events, etc.), you very well might want to use higher levels of flash, because here the primary thing you're trying to do is to get shadows off the face. My usual suggestion is to start with -1 stop and then work your way upward from there if that's not enough flash. I almost never go beyond -0.5 stops (in Standard TTL), by the way. Anything beyond that point is making the flash the primary source of light and the ambient lighting the "fill," which can look unnatural.

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