To define it in simple terms, Psychoanalytic Criticism is a form of literary critisism which uses some of the techniques of psychoanalysis in the interpretation of the iterature. This form of literary criticism is derived from a psychological theray practice known as Psychoanalysis which 'investigates the interaction of conscious and unconscious elements in the mind".
Sigund Freud was the pioneer of Psychoanalysis and based it upon specific theoris of how mind , the instincts and sexuality work. He highlighted the influence of our unconscious upon our actions.The unconscious mind , an area separable from workings of conscious mind, plays an important role as the largest, completely 'unknown' and inaccessible yet the most influential part of our mind. Processes such as Repression and Sublimation allow conflicting information, especially unresolved conflicts, desires and traumatic past experiences to move from conscious to unconscious and visa versa. Later Freud came up with a threetier model of psyche , dividing it into id, ego and superego which can be corresponded to the conscious, subconscious and unconscious 'levels' of personality.
Freud's ideas mainly focussed on the aspects of sexuality.Infant sexuality is the notion that sexuality does not begin at puberty rather it is developed in the infancy itself through his relationship with his mother.Oedipus complex is a connected concept where a child concieves the desire too eliminate the father and become sexual partner of the mother.
Another key idea is of that of energy drive associated with sexual desire called libido .Initially Freud assigned it three stages of focus---- the oral, the phallic and the anal. Later he found that it was a part of a more generalised drive called Eros or 'Life instict'.
Frued said that to avoid, resolve or redired conflicted amotions ,we employ Defense mechanisms; mental processes initiated unconsciously to avoid experiencing conflict or anxiety. For instance, Tranference is a phenomenon whereby a patient under analysis redirects the emotions recalled in analysis toward the psychoanalyst .
Dream analysis is another concept by Freud which explains the process by which real events or desires are transformed into dream images. These include processes like Displacement, where a person or an event is represented by another which is associated with it and condensation --- number of people, events or meanings are combined and represented by a single image in the dream---by the use of which the dreamwork of abstract ideas or feelings are compiled into concrete images.
Freudian Interpretation in literature is thought to be a matter of attributing sexual connotations to objects to be seen as phallic symbols nut in reality it is highly ingenious than being simplistic. For example, to imagine a dream featuring a Roman soldier would be connecting him with a real subject of the dream by a chain of associations.Assuming that the dreamer is a young adult, still under the thumb of an authoritarian father but wanting to breakaway from his influence, the Roman soldier would represent the father by the pross of association hence being his symbollic representation. But the dreamer, who is tempted to rebel against his father by entering a sexual liason of which his father would certinly disapprove, might represent the lover.Thus both the feared father and desired lover are condensed into the single dream of the Roman soldier.
The two-fold purpose of devices like Displacement and Condensation is firstly to disguise the repreesented fears and wishes contained in the dreams so that it gets past the censor which prevents their surfacing into the conscious mind and secondly to fashion the information into images, symbols and metaphors. Since dreams prefer 'showing'things over 'saying' them which is akin to literature, Freudian methods of interpretation has attracted the interest of literary critics.
Peter Barry takes up an example from Freud's book called The Psychopathology of Everyday Life to explain the plausibility of a Freudian interpretation.The example taken is from Freud's own experience and attributes significance to the forgetting of a word from a quotation.
Freud explains that while on a holiday with his family, he met an academic young man, who like Freud was a Jewish and they discussed the anti-semitism, which might hinder their careers. To express his strong feelings on the matter, the young man made a point with his quotation from latin poet Vigil, using words spoken by Dido, Queen of Carthage; 'Exoriare aliquis nostris ex ossibus ultor' meaning 'May someone arise from our bones as an avenger'. But the young man accidently leaves out theword 'aliquis' from the line. Freud corrects the quotation and the young man challenges him to explain the significance of this simple act of forgetting. Freud accepts the challenge and asked the young man to say whatever comes to his mind by directing his attention to the forgotten word without a specific aim.
Out of his sequel of responses, Freud points of the two saints ,Januarius and Augustine, whose names link them closely wit the calender. Thus Freud concludes that the young man has been uneasy about a cetrain event and if he had said the word 'aliquis', it would have reminded him of this anxiety . So the unconsious protects him from deleting the word from his conscious memory.
The young man breaks off and says in some embarrasement 'I've suddenly thought of a young lady from whom I might easily hear a piece of news that would be very awkward for both of us', to which Freud questions him back asking if her periods have stopped thus explaining the repression of his conflicted thoughts regarding 'the woman' skipping her periods (or getting pregnant).

