Imagination is an organ for gaining knowledge of the imperceptible world - of that part of reality which cannot be seen, heard, smelled, touched or tasted.
But of course Imagination can be wrong, that which is Imagined often is wrong.
On the other hand, so can the senses be wrong - there are hallucinations, illusions, misinterpretations, there are sensory deficits and neurological disorders where people cannot 'make sense' of their perceptions (e.g. agnosia).
So, senses are not always right, and must be validated; therefore the sometimes wrongness of imagination is not decisive so long as there is a way of validating Imagination.
If we consider how we validate our senses, this may tell us how we validate imagination. In brief, we validate our sensory inputs first in terms of coherence - does it make sense? And secondly in 'pragmatic' terms of living by the knowledge we get from sensory perceptions - and (in a very broad brush kind of way) deciding whether this 'works'.
For instance, if, by regarding our visual knowledge as true, we keep bumping into invisible things; then we may conclude there is something wrong with our vision.
The same kind of thing holds for Imagination: first we look for coherence (does what we Imagine make sense in light of other knowledge, including knowledge from memory?) If our basic approach to Life does not 'work' and we keep bumping into un-Imagined realities - then we may conclude there is something wrong with the way we value, or ignore, Imagination.
The proper question is: does it 'work' in Life, when we live on the basis of this Imagination-derived knowledge?
But what do we mean by 'work'? That word is doing a lot of work here!
The answer is that we ourselves have a say in deciding the criteria by which we judge something is working. The test of 'working' can be as shallow or deep as we choose to make it; and as specific and focused, or generalized and holistic.
Much Imagined knowledge works in some kind of short-term and very specific way (e.g. we don't instantly suffer agonies or die) - and on the other hand if we take a broader and deeper definition such that Life should be meaningful, purposeful and that we should feel to be in a real engagement with and relation to Life... then it is hard to link a specific piece of Imagination to such a very general and multi-causal outcome.
So it seems we can have a precise but rather useless specific evaluation; or a deep and real evaluation that is so imprecise that it can seldom or never be used to test any specific bit of Imagination.
And who says we should want more than just a very specific and short-term validation? Well, nobody 'says' it - but the point is: are we, personally, satisfied?
We can see this when somebody's Imagination is pathological - when somebody is clinically melancholic (endogenous depression) or else psychotically manic. (This has some equivalence to being blind or deaf.) The melancholic regards their Imagination as coherent and lives from it - thus he is wracked by guilt, demotivated, despairing, suicidal... The Imagination is dark, distorted, powerful.
The depressive regards the Imagination as true; but is the depressive contented with the outcome? Certainly not.
A harder case is the manic - who may be energetic, masterful, optimistic, indeed euphoric. Manics are usually contented with their state - most of the time; and from their perspective the problems are caused by 'other people'. This is like a form of sensory distortion - the only clue to the manic that he may be wrong, is that nobody else in the world agrees with him - he would have to trust some other person more than he trusted himself to escape this kind of delusion.
Something similar applies to people whose imaginations are disordered by paranoid (self-referential) and persecutory delusions - they are unhappy, perhaps terrified; but blame it on other people. However they are profoundly miserable - and again, if they could deeply trust someone else - instead of fearing everybody for their covert hostile motivations - that would provide the only possible escape.
Taking these into account, I think we can see that the judgement of whether Imagination 'works' depends upon our perceived environment, against-which we are evaluating our Imaginations. The question is: what is the Reality by which we judge whether something works?
And in this regard the most striking example is the world of Western modernity - in which 'reality' is the world of mass media and bureaucracy - and what is 'true' is that which conforms to these worlds.
This, I believe, is how the West has gotten itself into the situation of positively embracing and defending a world view in which the Imagination is seen as purely subjective - as a matter of psychotherapy at best and mere entertainment and distraction as the norm.
The fact that rejection of the objective validity of Imagination has led us to despair, demotivation and alienation is rendered irrelevant - because 'real life' is now the mass media and bureaucracy - and they tell us that this situation is true, inevitable, and indeed 'good'.
So, instead of judging Imagination by an ultimate good outcome in Life - we now (in essence) regard a good outcome in Life (i.e. a life that is meaningful, engaged, purposeful) as the product of delusion.
In sum, for Imagination to take its place as a viable form of knowledge requires that Life be grounded-in - judged in terms of - common sense and personal experience and close and trusting relationships.
That would complete the proper feed-back loop by which Imagination could be evaluated - and would again give us access to knowledge of the imperceptible aspects of reality.