In reading Virginia Woolfe's Mrs. Dalloway, the question was asked: what's the relationship between stream of consciousness writing and psychological realism?
In my answer I discussed what Wiki described of psychological realism in Henry James and Edith Wharton novels.
It made me think of my American Literature course when we read James's Turn of the Screw and analyzed the mindset of the nanny. Is she plain crazy, making up things, and then abusing kids? Is she crazy because she was abused as a child? Is there really a ghost? How brilliant James was to get us into her head that way.
In the same class we read Wharton's House of Mirth. Could the relationship between Lily and Selden have worked? Is Lily shallow? Is Selden a coward? That story was fascinating because we were in the characters' heads enough to wonder about their deep psychological processes, but we were still outside them to the extent that there were several questions and very few answers.
I find these authors brilliant (Woolfe is a bit too extravagant for me - as the British are known to be) in their ability to use third-person narratives to get the audience inside the characters.
A character doesn't have to be relate-able if we can see what they are thinking. That's the difference, I think, between a third person stream of consciousness novel and a first person account. Both are tied for my favorite literary style.
Quotes I loved from the story:
"She would not say of any one in the world now that they were this or were that. She felt very young; at the same time unspeakably aged. She sliced like a knife through everything; at the same time was outside, looking on. She had a perpetual sense, as she watched the taxi cabs, of being out, out, far out to sea and alone; she always had the feeling that it was very, very dangerous to live even one day. Not that she thought herself clever, or much out of the ordinary. How she had got through life on the few twigs of knowledge Fräulein Daniels gave them she could not think. She knew nothing; no language, no history; she scarcely read a book now, except memoirs in bed; and yet to her it was absolutely absorbing; all this; the cabs passing; and she would not say of Peter, she would not say of herself, I am this, I am that."
"Her only gift was knowing people almost by instinct, she thought"
"...what she loved was this, here, now, in front of her; the fat lady in the cab."
"What was she trying to recover? Did it not become consoling to believe that death ended absolutely?"
"How much she wanted it—that people should look pleased as she came in, Clarissa thought and turned and walked back towards Bond Street, annoyed, because it was silly to have other reasons for doing things..."
"...thank you, thank you, she went on saying in gratitude to her servants generally for helping her to be like this, to be what she wanted, gentle, generous-hearted."