Pragmatism, generally speaking, is a school of philosophical thought which is applied to all aspects of human existence. This generality also applies to William James’ writings on the subject, but within the overall schematic of his writings, James is more specifically directing his theories toward the application of pragmatic qualities in the composition of literature. Ultimately, pragmatism comes down to being a philosophy of utilitarianism: if the answer is of little or no significance in the real world, the question is not worth bothering to ask. That is an extremely simplified form of describing things, to be sure, but in the end, completely apt.
In order to fully understand and appreciate James’ writings about pragmatism, it is important to realize how intricately they are tied to his fostering the movement of realism in literature. Realism was only just beginning to capture the imagination of the reading public when James was writing his essays on the subjects and he was one of the instrumental voices which helped facilitate the movement of American fiction from the romanticism and sentimentalism which characterized the 19th century into the grittier naturalism of the 20th century.
Pragmatism applies to this transformation basically by asking the all-important question: what is at stake here? The answer for those pushing realism was that romance too dependent upon unrealistic elements like convenience, coincidence, and unlikely happy endings or melodramatic tragic endings engaged readers in stories in which nothing was at stake because the narratives took place outside of the context of their own familiarity with real life. In other words, the question of what is at stake in non-realistic fiction is not worth asking because the answer is no use to readers living in the real world where all those convenient plot devices and coincidences are requirements for their own life story to move forward.
The application of a pragmatic philosophy to life requires that experience be steeped in relativity. Everything must play out within context because everything does play out with context. Nothing can therefore be considered absolute except for the absolutism of a truth being verifiable by fact. To call someone a realist means they do not engage in fantastical thinking and that quality is essential to a pragmatic outlook since one cannot be pragmatic about something based on rootless conjecture. When James calls for literature to align more closely with real life it is not a rejection of the imagination, but rather that application of verifiable reality to that imagination. One can write a fantasy novel that is realistic, but one cannot write a realistic novel that is a fantasy. That is, when it is all boiled down, the most pragmatic example of the philosophical outlook about which James writes.