If you consider one of Shakespeare's sonnets and then compare it to a Harry Potter novel, for example, you will notice that the two are very different. In fact, despite both being bodies of text that you can read, they have just about nothing in common at all.
The term "classification of literature" is extremely broad and could mean a number of things. For example, you could place fiction and non-fiction as two distinct categories. Or, if you were to look at it a different way, you could juxtapose poetry and stories—like our example about Shakespeare and Harry Potter.
In a nutshell, the classification of literature according to purpose and content must look at what the intention of that literature is. Some literature (like religious texts) is intended to instruct, while fiction sets out to entertain, and poetry may set about to evoke emotion. Journalism, as another class of literature,...
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sets out to inform, while propaganda aims to persuade or manipulate.
There are many different ways to classify literature based on purpose and content. Didactic literature, for example, aims to teach the reader something. A didactic work of fiction might aim to teach us a certain moral or lesson by showing us what happens to someone who possesses some quality or trait that the author, or society, sees as a vice or detriment. If a character is punished for possessing this quality, then we come to understand that it is wrong to act as they do.
The purpose of satire is to poke fun at or even mock humanity—it can be lighthearted and amusing or cutting and harsh—and compel us to change in some way. A folk tale represents an attempt to reveal the customs of a culture and to keep that culture alive. A myth represents an attempt to explain or account for some natural phenomenon, like terrible storms or echoes or a type of flower. A poem represents the writer's attempt to capture something fundamental about the human experience or to represent the truth of something in a new and unexpected way. There are numerous such classifications.
There are a number of ways that literature is classified having to do with purpose, content, style, and form. The most basic categories in literature are fiction and non-fiction.
These are divided according to a work's purpose and content in the sense that the purpose of non-fiction is to tell a true story (purpose) that is constituted of actual facts and/or honest opinion (content). Fiction does not have to be true, actual, factual or honest in the opinions expressed by the author.
Since fiction is imaginary, any novel, such as those of Austen, Brontë, Cather, or Conrad, may be included in this genre, in addition to any other “made-up” work of literature.
Within non-fiction there are multiple major genres: biography, autobiography, memoir, creative non-fiction, journalism, and informative works like text books.
Within fiction there are many genres, some of which overlap. Some of the best known genres are mystery, western, detective/noir, science fiction, fantasy.
Also, "pulp fiction" and literary fiction are two categories that help to identify works in terms of the writer's intentions (to entertain or to produce art, respectively). These categories, again, are not rigid. A work can be both a piece of fantasy and a western and a work of pulp fiction at the same time.
While the term genre does not typically describe the difference between fiction and non-fiction, but rather distinguishes between books within these categories, this the term that best answers your question here.
Genre - a category or class of artistic endeavor having a particular form, technique, style, or content. Some current genres are the novel, short story, essay, epic, tragedy, comedy, satire, and lyric.
Additionally, books that strive to prove a point or make an argument can be called polemical books or polemics, whether fiction or non-fiction.
Another major genre of literature is drama, which has its own sub-categories.