I too have asked myself similar questions...
Literary Theory in a strict sense is the systematic study of
the nature of literature and of the methods for analyzing
literature. However, literary scholarship since the 19th century
often includes—in addition to, or even instead of literary theory in
the strict sense—considerations of intellectual history, moral
philosophy, social prophecy, and other interdisciplinary themes which
are of relevance to the way humans interpret meaning. In the
humanities in modern academia, the latter style of scholarship is an
outgrowth of critical theory and is often called[by whom?] simply
"theory". As a consequence, the word "theory" has become an umbrella
term for a variety of scholarly approaches to reading texts. Many of
these approaches are informed by various strands of Continental
philosophy and of sociology.
I started with one work within a series of 'a very short introduction to' books that I like, which usually tends to help simplify philosophy, but these books have also started to go into other areas, such as Literary Theory: A Very Short Introduction by Jonathan Culler.
What is literary theory? Is there a relationship between literature
and culture? These are some of questions addressed by Jonathan Culler
in this new edition of his highly popular Very Short Introduction.
Culler, an extremely lucid commentator and much admired in the field
of literary theory, uses easy-to-grasp examples as he outlines the
ideas behind schools of criticism that can otherwise be quite
daunting, such as deconstruction, semiotics, and postcolonial theory.
He explains "theory" not by describing warring "schools" but by
sketching key "moves" that theory has encouraged, and by speaking
directly about the implications of theory for thinking about
literature, human identity, and the power of language.
In this Second Edition, Culler includes much new material, including a
discussion of the "death of theory," a look at topics such as trauma
theory, ecocriticism, and the link between the theory of narrative and
cognitive science, plus a new chapter on "Ethics and Aesthetics." The
book also includes updated bibliographies. Shedding light on
everything from literature and social identity, to poetry, poetics,
and rhetoric, Literary Theory is a welcome guide for all lovers of
But from there I also began to read Roland Barthes, who was quite the literary theorist and philosopher...
Barthes' earliest ideas reacted to the trend of existentialist
philosophy that was prominent in France during the 1940s, specifically
to the figurehead of existentialism, Jean-Paul Sartre. Sartre's What
Is Literature? (1947) expresses a disenchantment both with established
forms of writing and more experimental, avant-garde forms, which he
feels alienate readers. Barthes’ response was to try to discover that
which may be considered unique and original in writing. In Writing
Degree Zero (1953), Barthes argues that conventions inform both
language and style, rendering neither purely creative. Instead, form,
or what Barthes calls "writing" (the specific way an individual
chooses to manipulate conventions of style for a desired effect), is
the unique and creative act. A writer's form is vulnerable to becoming
a convention, however, once it has been made available to the public.
This means that creativity is an ongoing process of continual change
History (also from Wikipedia Literary Theory Link)
The practice of literary theory became a profession in the 20th century, but it
has historical roots that run as far back as ancient Greece
(Aristotle's Poetics is an often cited early example), ancient India
(Bharata Muni's Natya Shastra), ancient Rome (Longinus's On the
Sublime) and medieval Iraq (Al-Jahiz's al-Bayan wa-'l-tabyin and
al-Hayawan, and ibn al-Mu'tazz's Kitab al-Badi). The aesthetic
theories of philosophers from ancient philosophy through the 18th and
19th centuries are important influences on current literary study. The
theory and criticism of literature are, of course, also closely tied
to the history of literature.
My understanding of Literary Theory is to apply cultural and social philosophy to literature by examining the times at which it was written, which inherently means one has to apply it to other works from that time and otherwise, in order to try and make distinctions about "what kind of work" it is and to whom or what was it serving.
So I'm not sure if there is a wrong method to examine Literature to make "theory", as much as there continues to be a lot of ways to systematically look at literary works from ethics, aesthetic, style, execution, and contemporary science (cognitive ability & relationships) to what it's trying to say and how that lines up with the times it is written in.