/lit/ - Literature

Is genre fiction such as sci-fi and fantasy considered worse (or less artistically valuable) than literary fiction because most books in those genres are bad, or because the tenets of those genres necessarily exclude books within them from being good?

For example, if someone wrote a very artistically valuable book set in a fantasy universe centered on a hobbit or a wizard or something, would that just be literary fiction, or would it be fantasy? Are fantasy books that are good enough to be considered literary fiction just called magical realism.

Pleas clear this up for me.

>American Psycho

Not sure how well known he is on /lit/, so hint:
He's French and see filename