Why do we need imagination-reality monitoring?

The ability to imagine scenarios decoupled from the immediate environment supports a wide range of cognitive functions, such as planning, memory, and decision making. However, this increase in cognitive sophistication comes with a potential cost of mistaking simulation for reality. Here, we provide a functional analysis of the imagination-reality problem and argue that the specific way that imagination is used to guide behaviour puts unique constraints on the ability to distinguish it from reality. Our analysis illuminates the space of possible solutions supporting the ability to separate imagination from reality and offers a roadmap for future empirical research.