arXiv:2607.10430v2 Announce Type: replace-cross Abstract: Dimensionality reduction has proven powerful for identifying neural manifolds, which are low-dimensional structures underlying high-dimensional neural activity. These low-dimensional representations have improved the interpretability of population-level coding. Yet whether such low-dimensional representations are biologically relevant and confer functional advantages in learning systems, or merely reflect neuron-level activity, remains contested in neuroscience. We show that an explicit information bottleneck forcing a recurrent neural network to learn a low-dimensional representation is necessary for rotational and out-of-distribution generalisation in a time-series prediction task. Using information-theoretic measures of causal emergence, we characterise the dynamics of this representation across the memorisation-to-generalisation transition, finding a non-monotonic trajectory which shows an initial decrease, a minimum, and a subsequent rise to a maximum, even as prediction loss falls monotonically. This trajectory scales with task complexity, and the magnitude of emergent structure reliably predicts generalisation performance. Analysis of hippocampal CA1 and medial prefrontal activity in rats learning an alternating maze task reveals analogous non-monotonic emergence dynamics that track behavioural performance. Together, these findings indicate that the ability of neural networks to learn compact, distributed and emergent representations confers a functional advantage for generalisation, supporting a causal role for learned representations in cognition.