Symbolism is simultaneously one of the most interesting and infuriating things in fiction. It's not so much the symbolism itself, but more how people see it. "The Lord of the Rings" will be my main example here because it has been interpreted in any number of ways. Also, because Tolkien has quite a good quote to start off this article:
"I cordially dislike allegory in all its manifestations, and always have done so since I grew old and wary enough to detect its presence. I much prefer history - true or feigned - with its varied applicability to the thought and experience of the reader. I think that many confuse applicability with allegory, but the one resides in the freedom of the reader, and the other in the purposed domination of the author." - J.R.R. Tolkien
In other words, the reader can decide to apply symbolic concepts onto a narrative. "The Lord of the Rings" has many interpretations; one of the most famous ones is the idea that idea the "one ring" represents the A-Bomb. Tolkien was a codebreaker in World War II, so no one can say the man was uninformed about the war and he is well-known for his dislike of the atomic bomb. "The news today about 'Atomic Bombs' is so horrifying one is stunned," said Tolkien, "The utter folly of these lunatic physicists to consent to do such work for war-purposes: Calmly plotting the destruction of the world!" Is it possible the dangers of the atomic bomb could be symbolically applied to dangers of the one ring? Absolutely; however, this is the nature of applicability. The freedom to choose the interpretation rather than having it forced on you. Many English students are probably familiar with the classic "the curtains are blue to represent this character's sadness!" and think about how silly that idea is.
Now I've been ragging on allegory quite a bit, and it is true that I, like Tolkien, also prefer applicability over allegory. But I feel like I should also point out the good things about allegory.
Allegory has a certain simplicity to it. You don't really have to think about it, at least compared to applicability. This is not to say it is less intelligent or of lesser quality than a narrative that embraces applicability. Take "The Chronicles of Narnia." Many, including myself, have said it is too obvious with its symbolism, but I still felt it had a good sense of adventure (granted the set pieces didn't help, but this isn't a review). I guess what I'm saying is it is often kind of a mindless adventure story, and there is nothing wrong with mindless entertainment.
There are of course more thought-provoking examples of allegory. George Orwell comes to mind, namely his famous novel, "1984." What of these? How did these things do allegory while still being thought-provoking? "1984," I think, is a different sort of narrative than, say, "The Lord of the Rings." The cultural significance of "1984" comes from the message behind the narrative rather than the narrative itself. The dangers of overzealous censorship, lack of privacy and its multitude of other themes.
Now let's get back to perhaps the biggest drawback of allegory, something I like to call fere realem (just roll with it, all the cool kids are making up terms). It's latin for "almost real." I mentioned earlier that I believed the symbolism in "The Chronicles of Narnia" was too obvious, and that's actually a pretty dangerous thing. However, it's more of a danger for traditional fantasy or settings that are clearly not our own, which means it doesn't apply to "Narnia" or "1984" as strongly as it does to my example.
Let's use a series called "Dragon Age." In the series' universe, mages are put down by several powerful organizations for being dangerous. In "Dragon Age 2," one mage, Anders, blows up the Chantry (think the Roman Catholic Church). Here's an image of it:
Look familiar? It did to me. This striking resemblance to the 9/11 attack on the World Trade Center was a weird moment for me. I'm not against tragedy inspiring fiction; it's unreasonable to assume it won't. But moments like this can pull you out of the fictional world you were invested in, but it doesn't pull you back into reality either. It's like a pseudo-fantasy, pseudo-realistic no man's land. This is fere realem. It's a scenario in a totally fantasy and fictional world that blatantly use real life events without properly implementing them into the world.
So in the end, neither is better than the other. However, I believe allegory is often more dangerous. Also, as a reader, I find applicability more interesting than allegory to the freedom it gives me.