Good horror takes this reduction of characters and makes it positive. It asks: What is human? And can this human quality be maintained in a world where everyone is desperate and induced to be an animal, ie going beyond even immoral behavior to amoral behavior? In short, good horror creates a recognizable human world where people are morally tested in the extreme.
I couldn’t agree more!
But this is also what makes writing horror such a challenge. While Fantasy and Science Fiction can whisk you away to to the far future or distant kingdoms, I’ve always felt good horror needs to take place in a setting as close to the real world as possible. Readers need to be able to identify with the world and picture themselves in it. This intimacy is vital if you want to have any chance of scaring the reader. The reader needs to feel at risk with the main character as their proxy.