Prize Stories : O. HENRY AWARDS 1985 (Doubleday: $16.95; 319 pp.)

A kid in a candy shop clutching a 10-dollar bill could not be happier than a short-story fan when the annual O. Henry awards are wrapped up in one delicious package and presented in book form.

Oddly enough, one doesn’t even have to agree that the 21 selections (by E. P. Dutton senior editor William Abrahams) are this year’s best that money could buy. For the most part, they are individually excellent and compose an eclectic and possibly even eccentric amalgam.

Where is the humor? There are little momentary jokes, to be sure--the sly wit that John Updike brought to the New Yorker in his story about an ambitious fellow who happens to be married to a twin; a Mademoiselle selection by Ilene Raymond--but on the whole the collection has all the humor of the year it represents, 1985, when possibly only Eddie Murphy and Madonna are playing life for laughs and everyone else is busy counting his assets and worrying about toxic wastes and meaningless relationships and dishonest politics.

Two of the selections are bogged down in despair. One shares top honors for first prize: Stuart Dybek’s “Hot Ice.” The centerpiece of this story is a dead girl frozen in ice (literally) and a miserable young street tough whose brother died an awful death behind bars. Dybek gives a voice to the underside of society, but he couples it with a sad lack of anything to say. Perhaps that’s the point.

The other half of the top prize belongs to Jane Smiley’s “Lily,” whose heroine is as fastidiously incapable of experiencing life as Dybek’s hero is of figuring it out. Hers is a beautifully layered short-story experience, finely crafted and nicely arranged. Three characters meet, clash, wound each other badly and lay blame, and the reader knows more than any one of them at any step of the narrative.

Sharing honors for despair is “The Quarry” by Helen Norris, which nearly begs one to cheer disintegration on to victory, so unremitting is the drabness of life. And does Peter Cameron’s “Homework” (from the New Yorker again), about the death of the family dog, really merit inclusion in this collection of bests?

Updike shows his superlative command of the language, always with precisely the right word, the small but devastating observation, the keen, cold eye of the master storyteller. For all their intricacies and contradictions, his characters are like insects under the judgmental eye of their maker. However, they are no less interesting for all that.

One of this collection’s shortest is also one of the finest examples of this genre. Ann Beattie’s “In the White Night” looks into the soul of a marriage; a man and woman who have survived the death of a child and have learned how to accept each other’s inadequacies and still love.

“Holding On” by Gloria Norris (Sewanee Review) is a thoughtful study of a woman who feels life passing her by and makes one brave try to turn it around.

Stream-of-consciousness narrative, twists of logic, poetic fantasy and journalistic reality all find a place in this year’s selection, the 65th anniversary edition. In fact, variety may have been as much a criterion in the choice as excellence itself.