Right for the Wrong Reasons: Epistemic Regret Minimization for Causal Rung Collapse in LLMs

Machine learning systems that are "right for the wrong reasons" achieve high performance through shortcuts that collapse under distributional shift. We show this pathology has a precise causal origin: autoregressive training provides no gradient signal to distinguish association P(Y|X) from intervention P(Y|do(X)), a failure we formalize as Rung Collapse. When outcome-based learning reinforces correct answers obtained through incorrect causal models, the agent becomes entrenched in flawed reasoning, a phenomenon we term Aleatoric Entrenchment. We propose Epistemic Regret Minimization (ERM), a belief revision objective that penalizes errors in causal reasoning independently of task success, and embed it within a three-layer architecture with three contributions grounded in knowledge representation: (1) a Physical Grounding Theorem proving that actions satisfying actuator independence implement valid do-operations, bridging action languages and do-calculus; (2) ERM as a causal belief revision operator satisfying AGM postulates, preventing entrenchment even when the agent succeeds for the wrong reasons; and (3) a failure mode taxonomy that classifies recurring reasoning errors and injects domain-independent guards, enabling cross-domain transfer. We prove asymptotic recovery of the true interventional distribution with finite-sample bounds. Experiments on 1,360 causal trap scenarios across six frontier LLMs reveal that Rung Collapse persists even in reasoning-enhanced models (3.7% for GPT-5.2), that steerability exhibits inverse scaling where advanced models resist generic correction, and that targeted ERM feedback recovers 53-59% of entrenched errors where outcome-level feedback fails.