The title is a reference to the end of James Joyce's A Portrait of the Artist as a Young Man. At the end of that book, the protagonist, an aspiring writer, apostrophizes:
"Welcome, O life! I go to encounter for the millionth time the reality of experience and to forge in the smithy of my soul the uncreated conscience of my race.”
I've never fully worked out what Wallace intended to communicate by the title of this story. Obviously it's some kind of objection to Joyce's premise. The best I can do is that Joyce is talking about making something (ie writing something) that will communicate the essence of his countrymen to anybody who reads it. Wallace's story is about the extreme difficulty of even more basic kinds of communication. Individual people's souls are compulsorily private things. Like Wallace's narrator notes in "Good Old Neon," you can only glimpse the stuff going on inside other people through a tiny keyhole. The title "The Soul is Not a Smithy" seems to be Wallace's way of suggesting something like: 'Look, the vast majority of the stuff that goes on inside people is too big to fit out our mouths. You don't forge things in your soul. Your soul is you, and it's stuck in your head, and that's what's so lonely about being a human being."
Wallace talked about writing being a way of escaping loneliness, but it was a personal, one-on-one kind of thing for him. The kind of grandiose, primal communication that Joyce was proposing isn't possible.
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