When can transformers compositionally generalize in-context?

Many tasks can be composed from a few independent components. This gives rise to a combinatorial explosion of possible tasks, only some of which might be encountered during training. Under what circumstances can transformers compositionally generalize from a subset of tasks to all possible combinations of tasks that share similar components? Here we study a modular multitask setting that allows us to precisely control compositional structure in the data generation process. We present evidence that transformers learning in-context struggle to generalize compositionally on this task despite being in principle expressive enough to do so. Compositional generalization becomes possible only when introducing a bottleneck that enforces an explicit separation between task inference and task execution.