The Narcissus story has all the condensed poetic power of the best myths, but as for its utilitarian function, it served as little more than a cautionary tale of excessive vanity up until the 19th century. That's when the Victorians took it in hand.
The Victorians were fond of using myths to describe behavioral pathologies, and Narcissus was ripe for this treatment. In the late 1890s, the British doctor and sexologist Havelock Ellis (that's his real name) began referring to people who masturbated too much as being "Narcissus-like." Others took up the idea, and in 1911 the psychoanalyst Otto Rank published a paper in which he explored narcissism and moved the concept beyond purely sexual territory to describe a generalized type of self-admiration.
Three years later Sigmund Freud took up the reins and used narcissism to denote both a psycho-sexual development phase that everybody goes through, and a pathology that occurs when people fail to progress beyond self-love to love of others. But while Freud theorized extensively about narcissism, he talked about it as a process or a state of mind, without identifying a personality type prone to narcissism. That job was left to another psychoanalyst named Robert Wälder, who described a narcissistic individual as a person who was arrogant, self-obsessed, indifferent to others and fond of sex but not intimacy.
Wilhelm Reich (three Austrians in a row!), later controversial for his pseudoscientific theories about Orgone energy, weighed in with the observation that most narcissists were men, articulating a link between masculinity and the aggression that characterized much narcissistic behavior.
The stage was set for Karen Horney (finally, a woman, and yes, that's her real name, too) to begin divvying up the trait into different types, which included aggressive-expansive, perfectionist and arrogant-vindictive. Narcissism, she proposed in 1939, was self-esteem inflated to an unhealthy degree. A narcissist, she said, thinks he's amazing, but for no good reason. Interestingly, she didn't believe that narcissists loved themselves too much, but rather that they were incapable of loving anybody at all, even their true selves. Narcissism, in her view, was a form of self-defense against profound vulnerability.
In 1960, Annie Reich (Wilhelm's wife) built on this idea and pointed to early traumatic experiences as the source of this vulnerability. Narcissists, she argued, compensate for those difficult experiences by withdrawing emotionally and creating a fantasy self who is powerful and superior to others. Unable to handle ambiguity, they believe themselves to be either completely successful or abject failures.
A year later, John Nemiah coined the term "narcissistic character disorder," and in 1968 Heinz Kohut used the description "narcissistic personality disorder," which is the term currently used to talk about clinical narcissism [source: Levy et al.]. The condition wasn't added to the Diagnostic and Statistical Manual of Mental Disorders (or DSM) until 1980, when it received its first diagnostic description.