The use of large language model (LLM) classifiers in finance and other high-stakes domains calls for a high level of trustworthiness and explainability. We focus on counterfactual explanations (CE), a form of explainable AI that explains a model’s output by proposing an alternative to the original input that changes the classification. We use three types of CE generators for LLM classifiers and assess the quality of their explanations on a recent dataset consisting of central bank communications. We compare the generators using a selection of quantitative and qualitative metrics. Our findings suggest that non-expert and expert evaluators prefer CE methods that apply minimal changes; however, the methods we analyze might not handle the domain-specific vocabulary well enough to generate plausible explanations. We discuss shortcomings in the choice of evaluation metrics in the literature on text CE generators and propose refined definitions of the fluency and plausibility qualitative metrics.

Existing work on Counterfactual Explanations (CE) and Algorithmic Recourse (AR) has largely focused on single individuals in a static environment: given some estimated model, the goal is to find valid counterfactuals for an individual instance that fulfill various desiderata. The ability of such counterfactuals to handle dynamics like data and model drift remains a largely unexplored research challenge. There has also been surprisingly little work on the related question of how the actual implementation of recourse by one individual may affect other individuals. Through this work, we aim to close that gap. We first show that many of the existing methodologies can be collectively described by a generalized framework. We then argue that the existing framework does not account for a hidden external cost of recourse, that only reveals itself when studying the endogenous dynamics of recourse at the group level. Through simulation experiments involving various state-of-the-art counterfactual generators and several benchmark datasets, we generate large numbers of counterfactuals and study the resulting domain and model shifts. We find that the induced shifts are substantial enough to likely impede the applicability of Algorithmic Recourse in some situations. Fortunately, we find various strategies to mitigate these concerns. Our simulation framework for studying recourse dynamics is fast and open-sourced.

Existing work on Counterfactual Explanations (CE) and Algorithmic Recourse (AR) has largely been limited to the static setting and focused on single individuals: given some estimated model, the goal is to find valid counterfactuals for an individual instance that fulfill various desiderata. The ability of such counterfactuals to handle dynamics like data and model drift remains a largely unexplored research challenge at this point. There has also been surprisingly little work on the related question of how the actual implementation of recourse by one individual may affect other individuals. Through this work we aim to close that gap by systematizing and extending existing knowledge. We first show that many of the existing methodologies can be collectively described by a generalized framework. We then argue that the existing framework fails to account for a hidden external cost of recourse, that only reveals itself when studying the endogenous dynamics of recourse at the group level. Through simulation experiments involving various state-of-the-art counterfactual generators and several benchmark datasets, we generate large numbers of counterfactuals and study the resulting domain and model shifts. We find that the induced shifts are substantial enough to likely impede the applicability of Algorithmic Recourse in situations that involve large groups of individuals. Fortunately, we find various potential mitigation strategies that can be used in combination with existing approaches. Our simulation framework for studying recourse dynamics is fast and open-sourced.