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Psychoanalytic theory refers to the definition of personality organization and the dynamics of personality development that underlie and guide the psychoanalytic and psychodynamic psychotherapy, called psychoanalysis, a clinical method for treating psychopathology. First laid out by Sigmund Freud in the late 19th century, psychoanalytic theory has undergone many refinements since his work. Psychoanalytic theory came to full prominence in the last third of the twentieth century as part of the flow of critical discourse regarding psychological treatments after the 1960s, long after Freud's death in 1939, and its validity is now widely disputed or rejected. Freud had ceased his analysis of the brain and his physiological studies and shifted his focus to the study of the mind and the related psychological attributes making up the mind, and on treatment using free association and the phenomena of transference. His study emphasized the recognition of childhood events that could potentially influence the mental functioning of adults. His examination of the genetic and then the developmental aspects gave the psychoanalytic theory its characteristics. Starting with his publication of The Interpretation of Dreams in 1899, his theories began to gain prominence.
Through the scope of a psychoanalytic lens, humans are described as having sexual and aggressive drives. Psychoanalytic theorists believe that human behavior is deterministic. It is governed by irrational forces, and the unconscious, as well instinctual and biological drives. Due to this deterministic nature, psychoanalytic theorists do not believe in free will.
Freud first began his studies on psychoanalysis and in collaboration with Dr. Josef Breuer, especially when it came to the study on Anna O.  The relationship between Freud and Breuer was a mix of admiration and competition, based on the fact that they were working together on the Anna O. case and must balance two different ideas as to her diagnosis and treatment. Today, Breuer can be considered the grandfather of psychoanalysis. Anna O. was subject to both physical and psychological disturbances, such as not being able to drink out of fear. Breuer and Freud both found that hypnosis was a great help in discovering more about Anna O. and her treatment. The research and ideas behind the study on Anna O. was highly referenced in Freud's lectures on the origin and development of psychoanalysis.
These observations led Freud to theorize that the problems faced by hysterical patients could be associated to painful childhood experiences that could not be recalled. The influence of these lost memories shaped the feelings, thoughts and behaviours of patients. These studies contributed to the development of the psychoanalytic theory.
Sigmund Freud determined that the personality consists of three different elements, the id, the ego and the superego. The id is the aspect of personality that is driven by internal and basic drives and needs. These are typically instinctual, such as hunger, thirst, and the drive for sex, or libido. The id acts in accordance with the pleasure principle, in that it avoids pain and seeks pleasure. Due to the instinctual quality of the id, it is impulsive and often unaware of implications of actions. The ego is driven by reality principle. The ego works to balance both the id and superego. In order to balance these, it works to achieve the id's drive in the most realistic ways. It seeks to rationalize the id's instinct and please the drives that will benefit the individual in the long term. It helps separate what is real, and realistic of our drives as well as being realistic about the standards that the superego sets for the individual. The superego is driven by morality principle. It acts in connection with the morality of higher thought and action. Instead of instinctively acting like the id, the superego works to act in socially acceptable ways. It employs morality, judging our sense of wrong and right and using guilt to encourage socially acceptable behavior.
The unconscious is the portion of the mind of which a person is not aware. Freud said that it is the unconscious that exposes the true feelings, emotions, and thoughts of the individual. There are variety of psychoanalytic techniques used to access and understand the unconscious, ranging from methods like hypnosis, free association, dream analysis. Dreams allow us to explore the unconscious; according to Freud, they are "the 'royal road' to the unconscious". Dreams are composed of latent and manifest content. Whereas latent content is the underlying meaning of a dream that may not be remembered when a person wakes up, manifest content is the content from the dream that a person remembers upon waking and can be analyzed by a psychoanalytic psychologist. Exploring and understanding the manifest content of dreams can inform the individual of complexes or disorders that may be under the surface of their personality. Dreams can provide access to the unconscious that is not easily accessible. Freudian slips (also known as parapraxes) occurs when the ego and superego do not work properly, exposing the id and internal drives or wants. They are considered mistakes revealing the unconscious. Examples range from calling someone by the wrong name, misinterpreting a spoken or written word, or simply saying the wrong thing.
The ego balances the id, the superego and reality in order to maintain a healthy state of consciousness. It thus reacts to protect the individual from any stressors and anxiety by distorting reality. This prevents threatening unconscious thoughts and material from entering the consciousness. The different types of defense mechanisms are: Repression, reaction formation, denial, projection, displacement, sublimation, regression, and rationalization.
Freud's take on the development of the personality (psyche). It is a stage theory that believes progress occurs through stages as the libido is directed to different body parts. The different stages, listed in order of progression, are: Oral, Anal, Phallic (Oedipus complex), Latency, Genital. The Genital stage is achieved if a person has met all of his or her needs throughout the other stages with enough available sexual energy. If the individual does not have his or her needs met in a given stage, he or she will become fixated, or "stuck" in that stage.
Freud's theory and work with psychosexual development lead to Neo-Analytic/ Neo-Freudians who also believed in the importance of the unconscious, dream interpretations, defense mechanisms and the integral influence childhood experiences but had objections to the theory as well. They do not support the idea that development of the personality stops at age 6, instead they believed development spreads across the lifespan. They extended Freud's work and encompassed more influence from the environment and the importance of conscious thought along with the unconscious. The most important theorists are Erik Erikson (Psychosocial Development), Anna Freud, Carl Jung, Alfred Adler and Karen Horney, and including the school of object relations.
The Psychoanalytic approach has a variety of advantages and limitations that have spurred further research and expansion into the realm of personality development.
Psychoanalytic theory is a major influence in Continental philosophy and in aesthetics in particular. Freud is considered to be a philosopher in some areas, and other philosophers, such as Jacques Lacan, Michel Foucault, and Jacques Derrida have written extensively on how psychoanalysis informs philosophical analysis.
When analysing literary texts, the psychoanalytic theory could be utilized to decipher or interpret the concealed meaning within a text, or to better understand the author’s intentions. Through the analysis of motives, Freud’s theory can be used to help clarify the meaning of the writing as well as the actions of the characters within the text.