Fixing That Free Lunch: When, Where, and Why Synthetic Data Fails in Model-Based Policy Optimization

Synthetic data is a core component of data-efficient Dyna-style model-based reinforcement learning, yet it can also degrade performance. We study when it helps, where it fails, and why, and we show that addressing the resulting failure modes enables policy improvement that was previously unattainable. We focus on Model-Based Policy Optimization (MBPO), which performs actor and critic updates using synthetic action counterfactuals. Despite reports of strong and generalizable sample-efficiency gains in OpenAI Gym, recent work shows that MBPO often underperforms its model-free counterpart, Soft Actor-Critic (SAC), in the DeepMind Control Suite (DMC). Although both suites involve continuous control with proprioceptive robots, this shift leads to sharp performance losses across seven challenging DMC tasks, with MBPO failing in cases where claims of generalization from Gym would imply success. This reveals how environment-specific assumptions can become implicitly encoded into algorithm design when evaluation is limited. We identify two coupled issues behind these failures: scale mismatches between dynamics and reward models that induce critic underestimation and hinder policy improvement during model-policy coevolution, and a poor choice of target representation that inflates model variance and produces error-prone rollouts. Addressing these failure modes enables policy improvement where none was previously possible, allowing MBPO to outperform SAC in five of seven tasks while preserving the strong performance previously reported in OpenAI Gym. Rather than aiming only for incremental average gains, we hope our findings motivate the community to develop taxonomies that tie MDP task- and environment-level structure to algorithmic failure modes, pursue unified solutions where possible, and clarify how benchmark choices ultimately shape the conditions under which algorithms generalize.