How Large Language Models are Designed to Hallucinate
This addresses the problem of unreliable AI outputs for users relying on LLMs for accurate information, though it is incremental in proposing new explanations rather than solutions.
The paper argues that hallucination in large language models is a structural outcome of the transformer architecture, not just due to data gaps or optimization errors, and proposes a taxonomy and design directions for truth-constrained architectures.
Large language models (LLMs) achieve remarkable fluency across linguistic and reasoning tasks but remain systematically prone to hallucination. Prevailing accounts attribute hallucinations to data gaps, limited context, or optimization errors. We argue instead that hallucination is a structural outcome of the transformer architecture. As coherence engines, transformers are compelled to produce fluent continuations, with self-attention simulating the relational structure of meaning but lacking the existential grounding of temporality, mood, and care that stabilizes human understanding. On this basis, we distinguish ontological hallucination, arising when continuations require disclosure of beings in world, and residual reasoning hallucination, where models mimic inference by recycling traces of human reasoning in text. We illustrate these patterns through case studies aligned with Heideggerian categories and an experiment across twelve LLMs showing how simulated "self-preservation" emerges under extended prompts. Our contribution is threefold: (1) a comparative account showing why existing explanations are insufficient; (2) a predictive taxonomy of hallucination linked to existential structures with proposed benchmarks; and (3) design directions toward "truth-constrained" architectures capable of withholding or deferring when disclosure is absent. We conclude that hallucination is not an incidental defect but a defining limit of transformer-based models, an outcome scaffolding can mask but never resolve.