Nietzsche describes the 'birth of tragedy' twice over in The Birth of Tragedy (amongst other things this book is surely one of the most spectacular academic career suicides ever, killing off Nietzsche's position as the rising star of classical philology in German speaking universities, which earned him his precocious chair at Basel), first in the widely read treatment of Attic Tragedy, and then the rather less widely appreciated discussion of Wagner as the repetition of the great Attic Tragic moment.
Such great moments are short lived. In the first half of the book Nietzsche is concerned with three writers over two generations, and the last of those (Euripides) is an example of decline. The Euripidean decline is part of a shift to the novel (Birth of Tragedy 15) via Aesopian fables and Plato's dialogues, which should also be seen in the context of the New Comedy. The novel is not an obviously major literary form in the ancient world, so there may be a form of extreme dismissiveness in suggesting that is what is left after the death of Attic tragedy.
A bit of context that should be noted, and that Nietzsche does nothing to make explicit, is that Friedrich Schlegel had suggested that Plato's dialogues were a combination of genres that anticipated the novel in the modern era, the novel of Cervantes and Laurence Sterne, which deserve to be regarded as a fusion of philosophy and poetry. This elevation of the novel was something new and distinctive in the years of the Jena Romantics when Schlegel wrote about philosophy and literature from the point of view of Romantic Irony, and apparently the philosophical appreciation of the novel was still incomplete in the 187os judging by what Nietzsche has to say, which looks very much like a repudiation of Schlegel.
Schlegel's views were rejected at the time by Hegel, who was unable to see the novel as something at all on a level with Epic, and for him it is really part of the 'death of art', in the Hegelian sense that art loses its status as the highest representation of philosophy and religion. So Nietzsche's death of tragedy and birth of the novel is itself bringing up an older account of the novel as part of the death of art, though probably not with any wish to support Hegel's position.
Hegel's doubts about the novel were also embedded in a belief that Enlightenment civility was based in the loss of the poetry of life in more heroic times, where human individuals had to be stronger in physical capacities and in the less abstract mental capacities. A full account of this would take in Giambattista Vico, Adam Ferguson, and Wilhelm von Humboldt, as well as David Hume, Adam Smith and Montesquieu. That concern is ss certainly carried on in Nietzsche.
Nietzsche's later attitude to the novel seems more appreciative, or at least he expresses admiration for Stendhal and Dostoevsky as psychologists. We might also note that Thus Spoke Zarathustra could be regarded as a novel, if an extremely strange one. Anyway, it is perhaps a more positive response to Schlegel's idea of poetry and philosophy in the novel, than is to be found in The Birth of Tragedy.
The idea that Wagner represents something very deep in European culture never leaves Nietzsche, even if the evaluation becomes less positive, the decadence and nihilism of Wagner is at the centre of essay three of On the Genealogy of Morality, which even sıuggests find the asceticist flaws of Parsifal are avoided in The Mastersingers of Nuremberg. In that text, Stedhal's essay On Love is the counter to the aesthetics of Kant and Schopenhauer, giving a rather implicit elevation to the role of the novelist compared with The Birth of Tragedy.
So returng to te earlier text, it very much suggests an anxiety that the novel is the banal norm dominating outside of of brief periods of cultural greatness, for which the model is Attic Tragedy. The era of Athenian independence and cultural greatness is superseded by an age of Alexandrine empire and cultural mediocrity, characterised by naturalism, illustration of moralising maxims, and cunning lower class characters distantly descended from the quick witted and deceptive hero Odysseus. All of this could refer to a dislike of the novel of Nietzsche's time, dominated by a 'realism' that later became 'naturalism', where moral lessons are learned as characters develop, and where lower class characters feature, often in struggle with the aristocratic world.
Nietzsche, at the time of The Birth of Tragedy, seems to have been an enthusiast for the new German Empire, but the low value of the Alexandrine compared with Attic culture perhaps hints at some unease about the transformation of a politically disorganised but culturally great Germany into a bombastic unified 'great power' based on political cunning and cynical wars.
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