---
title: "Large Language Models Are Latent Variable Models: Explaining"
description: "In-context learning in LLMs depends heavily on which few-shot demonstrations are chosen. 53 references, cited by 85 papers here."
authors: ["Xinyi Wang", "Wanrong Zhu", "Michael Saxon", "Mark Steyvers", "William Yang Wang"]
year: 2023
venue: "arXiv:2301.11916"
source: "https://arxiv.org/abs/2301.11916"
doi: "10.48550/arxiv.2301.11916"
arxiv: "2301.11916"
licence: "arXiv — non-exclusive license to distribute"
licence_url: "http://arxiv.org/licenses/nonexclusive-distrib/1.0/"
summary_licence: "Elamur Cosmic License"
canonical: "https://research.elamur.ai/free/en/papers/wang-2023-large-language-models-latent-variable/"
---
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# Large Language Models Are Latent Variable Models: Explaining and Finding Good Demonstrations for In-Context Learning

**Authors:** [Xinyi Wang](https://md.research.elamur.ai/free/en/authors/xinyi-wang/), [Wanrong Zhu](https://md.research.elamur.ai/free/en/authors/wanrong-zhu/), [Michael Saxon](https://md.research.elamur.ai/free/en/authors/michael-saxon/), Mark Steyvers and [William Yang Wang](https://md.research.elamur.ai/free/en/authors/william-yang-wang/) · **Year:** 2023 · **Venue:** [arXiv:2301.11916](https://md.research.elamur.ai/free/en/venues/neural-information-processing-systems/) ([NeurIPS 2023](https://md.research.elamur.ai/free/en/venues/neural-information-processing-systems/2023/)) · **Licence:** [arXiv — non-exclusive license to distribute](http://arxiv.org/licenses/nonexclusive-distrib/1.0/)

**Links:** [Publisher's page](https://arxiv.org/abs/2301.11916) · [PDF](https://arxiv.org/pdf/2301.11916) · [DOI 10.48550/arxiv.2301.11916](https://doi.org/10.48550/arxiv.2301.11916) · [arXiv 2301.11916](https://arxiv.org/abs/2301.11916) · [OpenAlex](https://openalex.org/W7133183456)

**Citations:** 31 citations (OpenAlex, 2026-10-14) · [85](https://md.research.elamur.ai/free/en/papers/wang-2023-large-language-models-latent-variable/cited-by/) in our library, of the 149,439 papers whose bibliographies we read

## Summary
In-context learning in LLMs depends heavily on which few-shot demonstrations are chosen. Existing theories of why it works have mostly been tested on synthetic data and toy Transformers. This paper treats real-world LLMs as implicit latent variable models, similar to topic models. In this view, the prompt lets the model infer a hidden concept variable that carries task and format information. The authors model data generation with a three-variable causal graph linking input, label and concept, in either causal direction. They prove that a finite set of well-chosen demonstrations can bring the in-context predictor to the Bayes optimal one. Their practical method has two phases. First, a small LM (under 1B parameters) learns concept tokens for each task. Second, the annotated examples most likely to predict those tokens are kept as demonstrations. These demonstrations transfer directly to larger GPT models, up to 175B parameters. Averaged over eight GPT models and eight text classification datasets, the method clearly beats baselines, and it also helps on GSM8K. This gives a cheap, model-transferable way to pick prompts and empirical support for the latent-concept view.

## Key points
- Evaluation covers eight GPT models, eight real-world text classification datasets and the GSM8K math word problem set. Baselines include random and similarity-based demonstration selection.
- Concept tokens are learned on a small LM and reused for selection. Lengthening the concept token sequence from 10 to 20 lowered performance, likely because extra tokens add noise.
- Selected demonstrations were mostly insensitive to ordering, with EmoC as the high-variance exception. This suggests task information lives in the demonstrations' content rather than their order.
- Chosen examples tend to be longer and harder. For SST2 they sometimes contain contrast ("but"), for GSM8K they show more deductive steps, and their labels are usually class-balanced.
- Published at NeurIPS 2023. Code is at github.com/WANGXinyiLinda/concept-based-demonstration-selection.

*Our summary of the paper, in our own words — not its text. The work belongs to its authors; read it at the links above.*

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💡 Concepts (1): [💡 Topic modeling](https://md.research.elamur.ai/free/en/concepts/topic-modeling/) · 47 works

## Cite

Cite as: Xinyi Wang, Wanrong Zhu, Michael Saxon, Mark Steyvers and William Yang Wang. 2023. Large Language Models Are Latent Variable Models: Explaining and Finding Good Demonstrations for In-Context Learning. arXiv:2301.11916.

The paper itself, not this page. BibTeX from the library's record of the work.

```bibtex
@misc{wang2023large,
  title = {{Large Language Models Are Latent Variable Models: Explaining and Finding Good Demonstrations for In-Context Learning}},
  author = {Xinyi Wang, Wanrong Zhu, Michael Saxon, Mark Steyvers and William Yang Wang},
  year = {2023},
  doi = {10.48550/arxiv.2301.11916},
  eprint = {2301.11916},
  archivePrefix = {arXiv},
  url = {https://doi.org/10.48550/arxiv.2301.11916}
}
```

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## References

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*Updated 29 October 2026*
