# Can LLMs Reconcile Knowledge Conflicts in Counterfactual Reasoning

arXiv: https://arxiv.org/abs/2506.15732 · HTML: https://mlsanity.com/paper/2506.15732/

## Key facts

- Cited by 7 papers in the map (data through 14 Oct 2026).
- Placed in Reasoning benchmarks and evaluation, one of 17 directions in LLM reasoning.
- Builds on 29 of its 31 references that are in the map.
- First posted on arXiv 15 Jun 2025.

## Placed in

- LLM reasoning / [Reasoning benchmarks and evaluation](https://mlsanity.com/lr/reasoning-benchmarks-and-evaluation/)

## Builds on (most cited first, 29 of 29)

- [Training language models to follow instructions with human feedback](https://mlsanity.com/paper/2203.02155/) (2022)
- [RoBERTa: A Robustly Optimized BERT Pretraining Approach](https://mlsanity.com/paper/1907.11692/) (2019)
- [Retrieval-Augmented Generation for Knowledge-Intensive NLP Tasks](https://mlsanity.com/paper/2005.11401/) (2020)
- [Dense Passage Retrieval for Open-Domain Question Answering](https://mlsanity.com/paper/2004.04906/) (2020)
- [HotpotQA: A Dataset for Diverse, Explainable Multi-hop Question Answering](https://mlsanity.com/paper/1809.09600/) (2018)
- [Training a Helpful and Harmless Assistant with Reinforcement Learning from Human Feedback](https://mlsanity.com/paper/2204.05862/) (2022)
- [Learning to summarize from human feedback](https://mlsanity.com/paper/2009.01325/) (2020)
- [REALM: Retrieval-Augmented Language Model Pre-Training](https://mlsanity.com/paper/2002.08909/) (2020)
- [Language Models as Knowledge Bases?](https://mlsanity.com/paper/1909.01066/) (2019)
- [Leveraging Passage Retrieval with Generative Models for Open Domain Question Answering](https://mlsanity.com/paper/2007.01282/) (2020)
- [How Much Knowledge Can You Pack Into the Parameters of a Language Model?](https://mlsanity.com/paper/2002.08910/) (2020)
- [Improving alignment of dialogue agents via targeted human judgements](https://mlsanity.com/paper/2209.14375/) (2022)
- [Causal Reasoning and Large Language Models: Opening a New Frontier for Causality](https://mlsanity.com/paper/2305.00050/) (2023)
- [Do Large Language Models Latently Perform Multi-Hop Reasoning?](https://mlsanity.com/paper/2402.16837/) (2024)
- [Causal Parrots: Large Language Models May Talk Causality But Are Not Causal](https://mlsanity.com/paper/2308.13067/) (2023)
- [Physics of Language Models: Part 3.2, Knowledge Manipulation](https://mlsanity.com/paper/2309.14402/) (2023)
- [CLadder: Assessing Causal Reasoning in Language Models](https://mlsanity.com/paper/2312.04350/) (2023)
- [Tug-of-War Between Knowledge: Exploring and Resolving Knowledge Conflicts in Retrieval-Augmented Language Models](https://mlsanity.com/paper/2402.14409/) (2024)
- [Grokked Transformers are Implicit Reasoners: A Mechanistic Journey to the Edge of Generalization](https://mlsanity.com/paper/2405.15071/) (2024)
- [Hopping Too Late: Exploring the Limitations of Large Language Models on Multi-Hop Queries](https://mlsanity.com/paper/2406.12775/) (2024)
- [Are LLMs Capable of Data-based Statistical and Causal Reasoning? Benchmarking Advanced Quantitative Reasoning with Data](https://mlsanity.com/paper/2402.17644/) (2024)
- [Faithful Explanations of Black-box NLP Models Using LLM-generated Counterfactuals](https://mlsanity.com/paper/2310.00603/) (2023)
- [AdaCAD: Adaptively Decoding to Balance Conflicts between Contextual and Parametric Knowledge](https://mlsanity.com/paper/2409.07394/) (2024)
- [Taming Knowledge Conflicts in Language Models](https://mlsanity.com/paper/2503.10996/) (2025)
- [Do Large Language Models Perform Latent Multi-Hop Reasoning without Exploiting Shortcuts?](https://mlsanity.com/paper/2411.16679/) (2024)
- [Discerning and Resolving Knowledge Conflicts through Adaptive Decoding with Contextual Information-Entropy Constraint](https://mlsanity.com/paper/2402.11893/) (2024)
- [Failure Modes of LLMs for Causal Reasoning on Narratives](https://mlsanity.com/paper/2410.23884/) (2024)
- [Grokking in the Wild: Data Augmentation for Real-World Multi-Hop Reasoning with Transformers](https://mlsanity.com/paper/2504.20752/) (2025)
- [Context-Parametric Inversion: Why Instruction Finetuning Can Worsen Context Reliance](https://mlsanity.com/paper/2410.10796/) (2024)

## Built on by (most cited first, 7 of 7)

- [Executable Counterfactuals: Improving LLMs' Causal Reasoning Through Code](https://mlsanity.com/paper/2510.01539/) (2025)
- [A Unified Definition of Hallucination: It's The World Model, Stupid!](https://mlsanity.com/paper/2512.21577/) (2025)
- [MetaCrit: A Critical Thinking Framework for Self-Regulated LLM Reasoning](https://mlsanity.com/paper/2507.15015/) (2025)
- [Code over Words: Overcoming Semantic Inertia via Code-Grounded Reasoning](https://mlsanity.com/paper/2601.18352/) (2026)
- [Towards Generalizable Reasoning: Group Causal Counterfactual Policy Optimization for LLM Reasoning](https://mlsanity.com/paper/2602.06475/) (2026)
- [The Illusion of textitWhat If: Evaluating the Breakdown of Counterfactual Reasoning in LLMs](https://mlsanity.com/paper/2608.27953/) (2026)
- [Who Warmed the Archives? LLMs Overestimate Historical Warmth](https://mlsanity.com/paper/2609.37499/) (2026)

## Abstract (arXiv)

Large Language Models have been shown to contain extensive world knowledge in their parameters, enabling impressive performance on many knowledge intensive tasks. However, when deployed in novel settings, LLMs often encounter situations where they must integrate parametric knowledge with new or unfamiliar information. In this work, we explore whether LLMs can combine knowledge in-context with their parametric knowledge through the lens of counterfactual reasoning. Through synthetic and real experiments in multi-hop reasoning problems, we show that LLMs generally struggle with counterfactual reasoning, often resorting to exclusively using their parametric knowledge. Moreover, we show that simple post-hoc finetuning can struggle to instill counterfactual reasoning ability -- often leading to degradation in stored parametric knowledge. Ultimately, our work reveals important limitations of current LLM's abilities to re-purpose parametric knowledge in novel settings.