Expanding on lectures originally given at Yale and Emory universities, as well as on essays written for an anthology and the New York Times Magazine, British novelist Byatt weaves this disparate material together into a coherent artistic credo. Unlike her sister, Margaret Drabble, a fervent defender of classic social realism, Byatt is more of a postmodernist, fond of narrative games like those employed in Martin Amis's Time's Arrow or Graham Swift's Waterland. The two opening chapters make a reasonably persuasive defense of historical fiction, such as Byatt's own Possession, but the book really gets going with ""Ancestors,"" a fascinating examination of the ways in which the natural sciences, particularly Darwinian ideas about evolution and time, have affected both the techniques and themes of writers as different as John Fowles and Penelope Fitzgerald. The bravura closing sections claim myths and fairy tales as the principal inspiration for modern fabulists like Italo Calvino and Roberto Calasso who are seeking, as is Byatt herself, ""quickness and lightness of narrative."" ""The Greatest Story Ever Told"" is not, to Byatt, the Bible, but the Thousand and One Nights, preeminent among those ""shape-shifting"" story collections that remind us ""narration is as much a part of human nature as breath and the circulation of the blood."" Throughout this cogently argued book, Byatt maintains a pleasingly direct tone, using the first person to state her reactions to particular books but always sticking to the point and seldom falling into self-aggrandizement. (However, the examples from her own work, though relevant, could have been elucidated more briefly.) Even readers who don't share her fondness for elaborately embroidered narratives will be struck by Byatt's well-argued contention that ""European storytelling derives great energy from artifice, constraints and patterning."" (Mar.) Forecast: Byatt the novelist reaches a broad audience, but this title features Byatt the literary critic, and is directed at serious students of literature. It won't enjoy the numbers that the novels garner.