On Semantic Loss Fine-Tuning Approach for Preventing Model Collapse in Causal Reasoning

Standard fine-tuning of transformer models on causal reasoning tasks leads to catastrophic model collapse, where models learn trivial solutions such as always predicting "Yes" or "No" regardless of input structure. We demonstrate that fine-tuning Gemma 270M on transitivity and d-separation tasks without semantic loss results in 100% collapse rate, with models achieving misleadingly high accuracy (73.9%) while learning no causal reasoning. We propose a semantic loss function with graph-based logical constraints and dynamic lambda scheduling that prevents this collapse. Our approach achieves 70.4% accuracy on transitivity tasks and 68.6% on d-separation tasks with stable, context-dependent predictions, representing a 42.7% improvement over collapsed baselines. Adversarial evaluation on 1,000 structural reasoning samples shows semantic models achieve 67-70% accuracy while collapsed models fail catastrophically at 43-71%. We validate our findings through comprehensive benchmarking on 200,000+ evaluation samples across five model variants, demonstrating that semantic loss is essential and not optional, for stable causal reasoning in transformers.