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Jay Gatsby, the title character of The Great Gatsby, is not "great" in a moral or virtuous sense. He is an unrepentant criminal, bootlegging during Prohibition to create his wealth and pursue his dream, Daisy.
While he is seen as great by the community, who are wooed by his parties and his mysterious past, the inner person of Gatsby is in fact troubled. He creates a persona to fool people, declaring himself a war hero and changing his name. In the sense that he is a performer, he could be ironically called "The Great Gatsby" as a magician on stage; he creates a grand illusion to fool people. Nick, the narrator, sees him as an embodiment of the American Dream; he came from poverty into wealth and now lives a high-class lifestyle. However, Nick is blinded by his own idealism and does not consider Gatsby's criminal vocation or his adulterous affair to be factors. Gatsby cannot be seen as truly "great," and in fact the title is somewhat sarcastic, as his name is not really Gatsby either.
Interestingly, F. Scott Fitzgerald did not like the final title. He had several literary titles in mind, but he was overruled by his editor and his wife, who both thought his chosen title was too obscure.
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