2024 NSF/CEME Decentralization Conference
Mechanism Design with
AI and Distributed Ledgers
April 19-21, 2024
Vanderbilt University
Nashville, TN
Organizers:
John P Conley
Vanderbilt University
Scott E Page
The University of Michigan
2024 NSF/CEME Decentralization Conference
Mechanism Design with
AI and Distributed Ledgers
April 19-21, 2024
Vanderbilt University
Nashville, TN
Organizers:
John P Conley
Vanderbilt University
Scott E Page
The University of Michigan
Schedule
Friday, April 19, 2024
3:00-4:15: Panel: Blockchains & Mechanism Design
4:15-4:30: BREAK
4.30-6.30: Trust in Blockchains
Daniel Obermeier, Decentralization vs. Blockchain Neutrality: The Unequal Burden of Ethereum’s Market Mechanism on dApps
John Conley, AI needs blockchain: Trustless solutions to failures in machine to colloidal markets
6:45-8:00: Dinner
Saturday, April 20, 2023
8:15 – 9:00: Breakfast
9.00-11.00: Decentralization in Blockchains
Hanna Halaburda, Permissioned vs Permissionless Blockchain Platforms: Tradeoffs in Trust and Performance
Harang Ju, The Virtualization Hypothesis: Explaining Sustained Blockchain Decentralization with Quasi-Experiments
11:00-11:15: Break
11.15-12.15 Algorithm Design
Shota Ichihasi, Buyer-Optimal Algorithmic Consumption
12.15-1.15: Lunch
1.30-3:45: Discrimination and Manipulation
John Zhu, Interventions Against Machine-Assisted Statistical Discrimination
Matheus Xavier Ferreira, I See You! Robust Measurement of Adversarial Behavior
3.45-4:15: Break
4:30-5:45: PANEL: AI and Mechanism Design
Sunday, April 21, 2023
8:15 – 8:45: Breakfast
8:45 – 12:00: Collusion
In Koo Cho, Collusion through Algorithms: Fact or Myth?
Ran Shorrer, Algorithmic Collusion by Large Language Models
Original Call for Papers
We seek theoretical, experimental, and empirical papers that apply tools and insights from mechanism design, game theory, and formal theory that fall into two broad categories:
Formal Models of Mechanisms, Markets, and Democracies with AI
Blockchains and Distributed Ledgers:
After the conference description, we have added some context for how this conference aligns with the conference’s historical agenda. As always, we welcome theoretical, experimental, and empirical papers of general interest to the mechanism design community.
Paper Submission Deadline January 26, 2024
Final Agenda Announced February 5, 2024
Formal Models of Mechanism, Markets, and Democracies with AI:
The rapid progress of AI will cause disruptions across the economy and society. Labor markets, job classifications, organizational structures, democratic and educational institutions, and the nature of work will all confront disruptions.
These disruptions raise a number of theoretical questions: how should humans allocate their limited capacity in light of the capacities of AI? Which increases in human capacity created by AI will produce zero-sum, red queen games and which produce positive sum interactions? How should market and democratic mechanisms be redesigned given human abilities will be amplified by AI? How will autonomous AI actors change organizational structures? How should AI be regulated? How can hybrid teams of humans and AI best make decisions? The list goes on and on. We do not want to limit what people might find theoretically of interest.
We present here a tentative set of categories that could be of interest to theorists.
AI-Assisted and Amplified Human Actors: In an ever growing number of contexts, human actions will be assisted and amplifed by AI. AI-Assisted Human Actors have different cognitive capacities than human actors. They have greater working memory, more bandwidth, and more computational power. Assumptions about human behavior, particularly those drawn from behavioral economics may require rethinking.
Autonomous AI Actors: Many mechanisms will include both autonomous AI actors and human actors. How should formal models represent AI agents? How are their actions and capacities meaningfully different from those of human actors? Does the fact that AI relies on objective functions and not underyling preference make their behavior less robust?
Alignment Problems: AI algorithms often exhibit alignment problems where the algorithm discovers an action that performs well according to the mathematical objective function assigned to an algorithm but which does not align with the underlying preferences of the designer of the algorithm.
Human + AI Mechanisms: In many decision domains including hiring decisions, college admissions, and parole decisions, humans rely on AI as assistants and also as autonomous actors. How should such decision protocols be designed? Humans and autonomous AI actors also interact in markets and on social media platforms. How should such markets and platforms be designed when they include both human and autonomous AI actors?
AI Mechanisms: AI makes possible new types and forms of mechanism by changing the structure of communication. For example, AI tools can absorb and categorize parallel communication from large numbers of human actors. AI can also, instantaneously, and strategically assign different information to different actors.
AI-Design: Autonomous AI agents and AI assisted human agents both rely on large language model (LLMs). LLMs are capable of categorizing enourmous amounts of unstructured data and then making predictions about the consequences of those actions. LLMs rely on an objective function which influences how the raw data becomes structured into categories and, ultimately, predictions. The distinction between autonomous AI actors and AI assisted human actors influences the design of AI objective function. AI actors act independently. Their objective functions should ensure robust aggregate behavior. When AI acts as an advisor or a “signal” to a human actor, the objective function should be designed to best inform an agent.
Blockchains and Distributed Ledgers:
Blockchains incorporate mechanisms and incentives as part of their protocols. Each chain’s approach to arriving at a consensus view of the chain state and making honest behavior by nodes in the validation network an equilibrium strategy, can be seen as a mechanism. Protocols also include more directed rewards to encourage beneficial behaviors, such as nodes making chain data available to users and the network, and punishments to discourage harmful ones, such as transaction censorship, front-running, Sybiling, and griefing the network.
Blockchains have several features that make it challenging to approach them as a conventional mechanism or game:
Endogenous Players: The player set is endogenous: There are thousands of blockchain projects competing for widespread adoption. Users choose which project or projects to join and may choose not to participate at all. Moreover, even these endogenous set of players can change in real time with every block committed.
Diverse Types: Blockchains have many player types: simple account holders, smart contract creators, stake delegators, voting stakeholders, light nodes following the chain state, full nodes participating in block building and transaction processing, and an array of governance, developer, and auditing roles. The distribution of individual players over these types is also endogenous and dynamic.
Unbounded Strategy Spaces: Blockchain mechanism designers do not have control over the strategy space. There are many significant, out-of-band, or off-chain, actions that a designer cannot incorporate into an on-chain mechanism. For example, getting a token onto a popular exchange, pumping a token’s value, using different hardware to create “work”, or spreading o fear, uncertainty, and doubt (FUD). In some protocols, governance can be used to upgrade, fix bugs, or even fundamentally change, the mechanism. Such protocols effectively incorporate a meta-mechanism for mechanism choice The continuation game after a governance action might have a very different set of strategies, payoffs, and even players.
Endogenous Payoffs: Payoffs can be endogenous: The designer might control the internal coin or token payoffs a mechanism provides, but he cannot control the value of those tokens. Players often get payoffs from off-chain sources. For example, revenues from selling tokens in ICOs, or from allocations to initial stakeholders, funders, or principles, are not modeled as payoffs resulting from choosing strategies within blockchain mechanisms. Building and deploying smart contracts with exploits, and payoffs to nation-states from forcing discloser of user identities tax reasons, are not, and cannot be incorporated into mechanisms.
Blockchains and distributed ledgers also research questions that intersect with traditional concerns of the mechanism design community. These include
Implementability: Algorithmic mechanism design adds computability to the list of desiderata, making implementation even more difficult. Players are often modeled as decision theoretic, rather than strategic players. The question of what can and cannot be implemented on a blockchain is open. Where are the limits, and how can protocols either bring more of the key levers within a designer’s control, or make them less relevant to outcomes or payoffs?
Human and AI Interactions: Blockchain is a domain where humans with conventional preferences and limitations, interact with AIs with pseudo-preferences, created or influenced by their creators. Does their superior computational skill and capacity give AIs insurmountable advantages against human players? Can mechanisms be designed using blockchain or other technologies to level to playing field?
Identification: Humans and human institutions have a physical existence which makes it possible to connect them to their historical actions. It is costly for human-based entities to change preferences, abilities, or habitual behaviors, rapidly, and the cost of building a reputation built on historical actions incentivizes consistency. It is not clear how one could even identify a specific, individual AI, and even if we could, it is quick and to change any AIs programing/preferences. Individual AI can also be perfectly replicated any number of times at low cost. Blockchain, however, can create a difficult to mutate, ordered, cryptographically bound, attestations, records of actions and transactions, and contingent, enforceable commitments. Can blockchain be used to as a data layer for mechanisms that make it possible to create AI histories, provable reputations, credible identities, and for humans and AI to transact and interact without the need for trust, and to their mutual benefit?
Background Framing:
Though AI might appear a “new” topic for the Decentralization conference, it raises a variety of question that align with the core themes that have animated the NSF/CEME Decentralization Conference from its beginning more than fifty years ago. One of Hurwicz, Marschak, Reiter, Radner, and Arrow’s original goals was to derive theoretical foundations for the design and analysis of mechanisms (systems) that produce, allocate, and recombine goods, information, and services. The conference has long emphasized fundamental questions such as how to best design markets, organizational structures, and voting rules in light of informational and computational constraints.
Early papers in mechanism design paid close attention to the informational and computational costs of institutional structures. Market economies, for example, were shown to require lower dimensional messages spaces than centrally planned economies. And, for a period of time, the conference had regular interactions with computer scientists to gain insights into modeling of computation. The research spawned by those conversations laid the groundwork for the field of algorithmic mechanism design.
A combination of trends, the rise of game theory and the emphasis on incentive compatibility and the derivation of the revelation principle, meant that computational and informational concerns became less central. The limits of human cognition re-emerged as a concern but more from a behavioral economics perspective.
Scholars of mechanism design now find themselves at an important moment. Advances computational power, computer science, and in machine learning have led to the development of blockchains and artificial general intelligence. Individually and jointly these present deep challenges to our current institutional architecture, the mechanisms, institutions, and organizations that we used to produce, allocate, and decide.
The advances in AI can be seen from three perspectives. First, they can be modeled as enhancements to human abilities. This approach obliges a return to the consideration of computational and informational constraints and costs as those have shifted. It also suggests a rethinking of the behavioral turn. How will human biases be affected by the presence of AIs?
Second, AI can be used to build autonomous agents that operate within existing mechanisms. These agents have assigned objective functions and possess capacities and limitations that differ from those of humans. Optimal mechanisms with humans and AI agents likely differ from optimal mechanisms that rely only on humans. In addition, AI agents cost less than humans and can be created almost instantaneously. These features present opportunities and challenges for institutional and mechanism design.
Third, artificial intelligence can be used to construct new institutional forms by relaxing constraints that bind human actors. As just one example, AI can categorize human speech from multiple people simultaneously. In meetings of only humans, speaking must be sequential. Simultaneous and sequential speech create distinct strategic environments.
Blockchains and distributed ledgers can be thought of as new types of mechanisms that would not have been possible without advances in information technology. Distributed ledgers can include AI agents. In designing distributed ledgers, a designer might want to incentivize those AI agents to be identifiable, and to behave honestly in commercial and other exchanges. If that can be accomplished, blockchains might become a part of larger mechanisms that allow humans and AIs to usefully communicate and cooperate despite their different motivations and capacities.
In sum, the challenges and opportunities created by AI and distributed ledgers reinvigorate many of the core themes and questions that have animated this conference for the past fifty years. The mechanism design community possesses tools, insights, and theories that can advance our understanding of these technologies and guide their implementation and regulation.