Understanding Large Language Models

Large Language Models (LLMs) represent one of the most significant advances in AI and natural language processing in recent years. Still, many pressing questions about their mechanisms, capabilities, and relationship to human cognition remain highly debated. This chapter aims to outline our current understanding of LLMs by discussing recent evidence on emerging capabilities and their mechanistic implementation within processing layers. We begin with a concise overview of the Transformer architecture, emphasizing how the attention mechanism enables training on massive datasets, allowing LLMs to function as generalist rather than specialized models. Next, we examine emergent LLM capabilities that appear to resemble aspects of human cognition, including symbolic reasoning, theory of mind, and deception strategies. Several studies provide evidence that LLMs can solve tasks previously thought to require human-like cognition. Other studies reveal insightful failure cases that shed light on the differences between human and LLM cognition. Alongside these findings, we review explainable AI approaches ranging from neuron activation analysis to circuit tracing. In the final section, we address current debates concerning what LLMs genuinely understand versus what they merely appear to understand. Prominent arguments against AI anthropomorphism point to the simplicity of LLM training objectives, claiming that LLM behavior is better explained by pattern memorization of training data than by genuine cognition. We argue that this standpoint is guided by misconceptions about optimization processes and cognitive capacity, and advocate for a more nuanced discussion of LLM cognition that neither dismisses the differences between humans and LLMs nor precludes the possibility of AI cognition through overly simplistic reductionist arguments.

The Role of Social Learning and Collective Norm Formation in Fostering Cooperation in LLM Multi-Agent Systems

A growing body of multi-agent studies with Large Language Models (LLMs) explores how norms and cooperation emerge in mixed-motive scenarios, where pursuing individual gain can undermine the collective good. While prior work has explored these dynamics in both richly contextualized simulations and simplified game-theoretic environments, most LLM systems featuring common-pool resource (CPR) games provide agents with explicit reward functions directly tied to their actions. In contrast, human cooperation often emerges without full visibility into payoffs and population, relying instead on heuristics, communication, and punishment. We introduce a CPR simulation framework that removes explicit reward signals and embeds cultural-evolutionary mechanisms: social learning (adopting strategies and beliefs from successful peers) and norm-based punishment, grounded in Ostrom's principles of resource governance. Agents also individually learn from the consequences of harvesting, monitoring, and punishing via environmental feedback, enabling norms to emerge endogenously. We establish the validity of our simulation by reproducing key findings from existing studies on human behavior. Building on this, we examine norm evolution across a $2\times2$ grid of environmental and social initialisations (resource-rich vs. resource-scarce; altruistic vs. selfish) and benchmark how agentic societies comprised of different LLMs perform under these conditions. Our results reveal systematic model differences in sustaining cooperation and norm formation, positioning the framework as a rigorous testbed for studying emergent norms in mixed-motive LLM societies. Such analysis can inform the design of AI systems deployed in social and organizational contexts, where alignment with cooperative norms is critical for stability, fairness, and effective governance of AI-mediated environments.