Organizations: Naveen Jindal School of Management, University of Texas at Dallas, USA
Abstract
The discovery of scaling laws has highlighted the extraordinary potential of AI systems with a striking empirical pattern: as AI systems scale, their capabilities tend to improve predictably. Yet, in real-world applications, AI rarely operates in isolation; instead, it often works alongside humans, raising the question of whether these gains persist in human-AI collaboration. In this work, we develop an analytical model to examine when the empirical scaling benefits of AI translate into improved human-AI joint system performance. We demonstrate that the performance of a human-AI system can scale positively as the AI scales up-provided that humans have an accurate perception of the AI's capabilities. Human misperception, however, can fundamentally alter this relationship: i) when humans over-perceive the AI's capabilities, a scaling paradox may arise, in which greater AI scale reduces overall system performance and amplifies firm-level profit losses, and (ii) when humans under-perceive the AI's capabilities, performance still improves with scale but at a substantially slower rate. We further show that firms can actively manage these distortions through operational policies such as cost internalization and perception alignment, whose effectiveness depends on the economics of AI deployment and the direction of human misperception. These findings suggest that organizations may benefit more from managing the human-AI interface than from simply investing in larger, more expensive AI systems. More broadly, our results suggest that AI scaling should be viewed not only as a technological challenge, but also as a behavioral and operational one, and caution against the view that larger AI systems will automatically lead to better operational outcomes. Whether AI scaling creates value ultimately depends on how increased AI capabilities shape human beliefs and collaborative efforts.
Artificial intelligence is increasingly embedded in human decision-making, yet distinguishing systems that genuinely amplify human cognition from those promoting excessive dependence remains underdefined. This paper introduces a framework to distinguish cognitive amplification (improving hybrid performance without degrading human capability) from cognitive delegation (outsourcing reasoning to the AI). We define four metrics: the Cognitive Amplification Index (CAI*), Dependency Ratio (D), Human Reliance Index (HRI), and Human Cognitive Drift Rate (HCDR). We test this framework in an agent-based NetLogo simulation across three reliance regimes and multiple dependency-atrophy configurations, performing constrained optimizations and parameter sweeps to determine if positive collaborative gain is recoverable. Finally, we introduce an extension with an explicit human-AI interaction term. Our metrics effectively distinguish degenerate AI-dominated delegation, capability-preserving but weakly competitive interaction, and structurally dependent boundary regimes. Across all baseline configurations, no regime achieves positive collaborative gain relative to the best standalone baseline, even when reducing capability atrophy to zero. This limitation proves structural rather than merely parametric. Positive collaborative gain (CAI* > 0) becomes attainable only after introducing an explicit interaction term allowing retained human capability to contribute directly to the assisted output. This framework provides a basis for evaluating whether human-AI systems remain cognitively sustainable. The results suggest that preventing capability erosion alone is insufficient for genuine amplification if the architecture remains delegation-oriented. Amplification requires both preserved human capability and a coupling mechanism through which it contributes productively to the hybrid outcome.
The burgeoning field of LLM-based Multi-Agent Systems (MAS) promises to tackle complex tasks through collaborative intelligence, yet fundamental questions regarding their scaling behavior and intrinsic collective dynamics remain underexplored. This paper systematically investigates how the performance of a homogeneous MAS evolves as the number of agents increases, isolating the variable of collaboration from model or knowledge heterogeneity. We propose the Sequential Iterative Multi-Agent System (SIMAS) framework, a minimalist architecture centered on sequential inter-agent communication, to clearly observe scaling effects. Through extensive experiments across diverse tasks and model scales, we establish that MAS performance does not scale monotonically with agent count but follows a pattern of diminishing returns, governed by a trade-off between collaborative synergy and coordination overhead. Our findings reveal that effective MAS requires a sufficiently capable base LLM, that task type critically modulates the optimal agent count, and that collective intelligence is an emergent property contingent on strategic interaction design rather than a guaranteed outcome of agent plurality. The performance degradation stems coordination overhead rather than merely long-context failure, and the scaling tendency generalizes across interaction architectures like structured debate topologies. This work provides a foundational understanding of MAS scaling laws, offering practical guidance for designing efficient collaborative systems and challenging the prevailing assumption that more agents invariably lead to better performance.
Successful diffusion of AI in the workforce hinges on the economic value that AI brings to human endeavors. Bringing AI into the workforce is more than deploying a powerful new technology -- it is launching a new form of collaboration. Each human worker is now endowed with a team of AI agents; work can be delegated to these agents, and the role of the human shifts towards managing and monitoring. How can we maximize the economic value from collaboration with AI in the workforce? How can we make it a "true" collaboration that empowers human workers rather than replacing them? We take an approach that combines the fields of theoretical computer science and economics, highlighting the potential of algorithmic tools grounded in economic principles to improve the effectiveness of human-AI collective work. We consider two tiers of tools: (1) tools for better coordination, via algorithmic management of interdependencies; (2) tools for better cooperation, via contractual incentive alignment. We show how a principled approach based on algorithmic and economic research enhances both coordination and cooperation, charting a pathway for future research to inform AI markets.