On the Eligibility of LLMs for Counterfactual Reasoning: A Decompositional Study

Abstract: Counterfactual reasoning has emerged as a crucial technique for generalizing the reasoning capabilities of LLMs. By generating and analyzing counterfactual scenarios, researchers can assess the adaptability and reliability of model decision-making. Although prior work has shown that LLMs often struggle with counterfactual reasoning, it remains unclear which factors most significantly impede their performance across different tasks and modalities. In this paper, we propose a decompositional strategy that breaks down the counterfactual generation from causality construction to the reasoning over counterfactual interventions. To support decompositional analysis, we investigate 11 datasets spanning diverse tasks, including natural language understanding, mathematics, programming, and vision-language tasks. Through extensive evaluations, we characterize LLM behavior across each decompositional stage and identify how modality type and intermediate reasoning influence performance. By establishing a structured framework for analyzing counterfactual reasoning, this work contributes to the development of more reliable LLM-based reasoning systems and informs future elicitation strategies.