Volume Transmission Implements Context Factorization to Target Online Credit Assignment and Enable Compositional Generalization

The modern connectivist framing of neural computation emphasizes the primacy of synaptic communication at the risk of neglecting the influence of the surrounding neuromodulatory environment --- a neuron's'biophysical context.' Decades of experimental work has established two views of neuromodulatory (NMs) influence: 1) NMs significantly alter circuit dynamics and 2) NMs gate synaptic plasticity, acting as a'third factor' in learning. Here, we unify these perspectives, proposing that neuromodulation via volume transmission implements a powerful computational principle: context factorization. We derive an endogenously neuromodulated Recurrent Neural Network (e-nmRNN) from a rate reduction of NM release, showing how NM concentrations dynamically factorize network connectivity. This framework reveals how multiplicative NM gating distinctly influences dynamical regimes compared to additive input. Crucially, this context factorization enables targeted online credit assignment: learning rules derived for the e-nmRNN are naturally gated by NM concentrations, localizing updates to relevant contexts.