There is no outside authority, and the essays students write are often marked as much for style and creativity as saying anything pertinent about the text. It often seems that the more outlandish and wild the theory, the better the mark, as long as there is the slightest bit of textual warrant for your position. The contemporary literary theorist has a very simple answer to the question of how we know what is right and wrong - we can t, because we cannot know anything. Not just that we don t know, but that knowing is a conceptual impossibility. Hence ethics and morality are simply linguistic constructs.
Human history is also meaningless.
We cannot know what really happened, or ascribe intent or meaning to it. Hence we have recently seen a revival in historical novels and films which are now concerned to present history their way. Titanic is a good example. The truth seemed not to matter at all to James Cameron, who is on record as saying History is a consensus hallucination. What matters is not what happened, but what we think happened.