There appear to be three principal conceptions of the meaning of Melville's Billy Budd: the first, and most heavily supported, that it is Melville's "Testament of acceptance," his valedictory and his final benediction. The second view, a reaction against the first, holds that Billy Budd is ironic, and that its real import is precisely the opposite of its ostensible meaning. Still a third interpretation denies that interpretation is possible; a work of art has no meaning at all that can be abstracted from it, nor is a man's work in any way an index of his character or his opinion. All three of these views of Billy Budd are in their own sense true.—R. H. Fogle
Some critics have interpreted Billy Budd as a historical novel that attempts to evaluate man's relation to the past. Thomas J. Scorza has written about the philosophical framework of the story. He understands the work as a comment on the historical feud between poets and philosophers. By this interpretation, Melville is opposing the scientific, rational systems of thought, which Claggart's character represents, in favor of the more comprehensive poetic pursuit of knowledge embodied by Billy.
In her book Epistemology of the Closet (1990/2008), Eve Sedgwick, expanding on earlier interpretations of the same themes, posits that the interrelationships between Billy, Claggart and Captain Vere are representations of male homosexual desire and the mechanisms of prohibition against this desire. She points out that Claggart's "natural depravity," which is defined tautologically as "depravity according to nature," and the accumulation of equivocal terms ("phenomenal", "mystery", etc.) used in the explanation of the fault in his character, are an indication of his status as the central homosexual figure in the text. She also interprets the mutiny scare aboard the Bellipotent, the political circumstances that are at the center of the events of the story, as a portrayal of homophobia.
Melville's dramatic presentation of the contradiction between the requirements of the law and the needs of humanity made the novella an "iconic text" in the field of law and literature.. Earlier readers viewed Captain Vere as good man trapped by bad law. Richard Weisberg, who holds degrees in both comparative literature and law, argued that Vere was wrong to play the roles of witness, prosecutor, judge and executioner, and that he went beyond the law when he sentenced Billy to immediate hanging. Based on his study of statutory law and practices in the Royal Navy in the era in which the book takes place, Weisberg argues that Vere deliberately distorted the applicable substantive and procedural law to bring about Billy's death. Judge Richard Posner has sharply criticized these claims. He objects to ascribing literary significance to legal errors that are not part of the imagined world of Melville's fiction and accused Weisberg and others of calling Billy an "innocent man" and making light of the fact that he "struck a lethal blow to a superior officer in wartime." .
H. Bruce Franklin sees a direct connection between the hanging of Budd and the controversy around capital punishment. While Melville was writing Billy Budd between 1886 and 1891, the public's attention was focused on the issue. Other commentators have suggested that the story may have been based on events onboard USS Somers, an American naval vessel; Lt. Guert Gansevoort, a defendant in a later investigation, was a first cousin of Melville.
Harold Schechter, a professor who has written a number of books on American serial killers, has said that the author's description of Claggart could be considered to be a definition of a sociopath. He acknowledges that Melville was writing at a time before the word "sociopath" was used.
The centrality of Billy Budd's extraordinary good looks in the novella, where he is described by Captain Vere as "the young fellow who seems so popular with the men—Billy, the Handsome Sailor," have led to interpretations of a homoerotic sensibility in the novel. Laura Mulvey added a theory of scopophilia and masculine and feminine subjectivity/objectivity. (Quote from Billy Budd, Sailor, Penguin Popular Classics, 1995, p. 54). This version tends to inform interpretations of Britten's opera, perhaps owing to the composer's own homosexuality.