Despite the fact that the story was not published till 1926 (though it may well have existed in Schnitzler’s mind, or his files, before that), it shows no signs of taking place in a post-1918, post-Hapsburg world. Its characters and atmosphere are as dated as its traffic: there are no cars or buses, no hint of Austria’s final reduction to a post-imperial republic.

When Fridolin is confronted by a band of rowdy students, one of whom seems deliberately to insult him by bumping into him, the smart louts are said to be members of just such an ‘Alemannic’ club as bounced Theodor Herzl from membership back in the 1880s. Fridolin is not declared to be a Jew, but his feelings of cowardice, for failing to challenge his aggressor, echo the uneasiness of Austrian Jews in the face of Gentile provocation; Freud, for famous instance, never forgave his father for failing to stand up to a bully who knocked his hat into the gutter. Jews were said to be natural cowards and not worthy of Aryan steel. Robert Wistrich, however, suggests that the reason for bouncing Jews from student fraternities and for refusing them ‘satisfaction’ was that, in fear of provocation, a good many Jews had become so expert at swordsmanship that they were embarrassingly likely to win in a duel.

Although no coward, Schnitzler disdained to fight. He satirized the absurdity of the point of honour and the double standards of Viennese ‘morality’ in a play (Das Ferne Land) in which a philandering husband challenges and kills his wife’s sole lover, thus extinguishing a young life and bringing incurable bitterness to his marriage, simply because vanity requires it.

The Jewish question is only lightly touched upon in Dream Story. The Bohemian wanderer, Nachtigall, is said to have had a quarrel with a bank-manager in whose house he played and sang a raucously indecent song. His host, ‘though himself a Jew… hissed a Jewish insult in his face’, after which ‘his career in the better houses of the city seemed to close for ever’. This Jewish anti-Semitism (by no means the same as self-hatred) confirms Schnitzler’s melancholy observation of ‘the eternal truth that no Jew has any real respect for his fellow Jew, never’. He concedes that he sometimes says more about Jews than may seem ‘in good taste, or necessary or just’. He hoped that in some happier future it would become impossible to imagine why the issue was so important to him. He died two years before Hitler’s access to power. Subsequent events proved that even his genius for conjuring up nightmares was incapable of conceiving the horrors in store.

Although Fridolin does not endure the same insult as Nachtigall, there is, I suspect, cunning in Schnitzler’s using it to ‘trail’ what happens when his hero goes to the erotic house party to which Nachtigall lures him. If he is not abused or revealed as a Jew, his unmasking by the in-group and his summary eviction from the revels surely resemble the kind of jeering ostracism of which any arriviste might at any moment be the victim. Fridolin’s ‘rescue’ by the beautiful woman is both romantic and degrading: when she takes upon herself the consequences of his transgression, she becomes, in a sense, more manly than he is allowed, or dares, to be. This, as well as desire, is one of the motives for his restless need to find her again.

It may be reading too much into a good tale to remark that Fridolin’s monk’s habit (though banal enough for a fancy-dress occasion) means that, in disguise, he has chosen to cross the line between Jews and Catholics; it is, one might argue, justice that he is discovered. The paedophiles disguised as ‘vehmic judges’, whom he meets earlier in the costumier’s shop, presage the elegant company who, soon afterwards, will pass sentence on Fridolin. Vehmic judges sat on rather sinister nocturnal councils which, in the Middle Ages, supplied rough justice in areas where the central authority was too weak to assert itself. The ironic allusion to the waning powers of the Hapsburg emperor is both subtle and unmistakable.

Schnitzler’s imaginary world neither outgrew nor spread beyond the empire which Franz-Josef kept together as much by his longevity as by the exercise of power. What Claudio Magris calls ‘the Hapsburg myth’ was an unceasingly fertile source of revisions and fantasies, sentimental or cruel, or both. Franz-Josef was, in many ways, more bourgeois than imperial: the supreme bureaucrat in a state where official respect for forms was paramount. Like many Viennese males, the emperor went regularly to his office; like their emperor, many men had both wives and mistresses. Duplicity was a duty in a society where men were ashamed not to betray their partners and women were shameless if they did.

Schnitzler was a conformist rebel; he enjoyed the sweet wickednesses of which he was so accurate a chronicler. His affection for what he called ‘süsse Mädel’ (‘sweet young things’) was matched by the alacrity with which he replaced one with another. Anatol – a series of sketches about a smart man-about-Vienna much like himself – brought him fame by the time he was barely thirty and he never lost it. He wore success with elegant lack of surprise. He seemed to take himself no more seriously than his conquests. His reputation has perhaps suffered from his affectations of effortlessness.

The brevity and levity of Schnitzler’s style, not least in Dream Story, make it seem as if everything came easily to him. Because he was expert in the classic bourgeois genres – the boulevard play, the sophisticated magazine story – it is easy to miss the inventiveness and innovation he brought to them. He was one of the first novelists to use interior monologue; Fräulein Else is a neat instance (it too features a kind of delirious dream).