Cheap Verifiers, Large Blind Spots: Measuring the Reliability Cost of Cost-Saving Cascades

Inference cascades cut cost by answering most queries with a cheap model and escalating a hard tail to a frontier model that acts as verifier. A natural extension closes the loop: fine-tune the cheap student on the verifier's rejections so the escalation rate, and cost, fall each round. We measure this loop on real LLMs and report four findings. First, the verifier's blind spot, the fraction of the student's wrong answers it accepts, is large and moves adversarially: it grows with student capability (β from 0.12 to 0.55 as the student scales 0.5B to 32B) and shrinks with verifier capability, so it is worst in the cheap-student, cheap-verifier regime cascades exist to create. Second, buying it away returns the saving: a frontier verifier drives β to about 0.05 but then escalates on 46% of hard-MATH queries against a 39% true error rate, paying the frontier price on nearly half of all traffic. Third, naive corrective fine-tuning on the verifier-rejected tail does not improve the small student but degrades and ultimately collapses it, across every teacher we tried (cross-family and same-family), so at this scale the self-improving loop is self-defeating. Fourth, through all of this the cascade's own dashboard, every metric computed through the verifier, reads a flat 3% error while true delivered error swings up to 32%: the system is blind to its own degradation by construction. We then give the theory that explains the blindness, a two-population conservation law, ε_infty lesssim q_0 β_0, under which every in-loop metric improves while true quality does not, and a synthetic study that validates the mechanism. The practical conclusion: the reliability of a self-improving cascade cannot be read from any metric computed through its own verifier.