Do Large Language Models Hallucinate Electric Fata Morganas?

Large language models hallucinate--producing fluent, confident, factually wrong outputs--with a consistency that persists across generations and scales. Existing taxonomies classify hallucination by output type, distinguishing intrinsic from extrinsic failures and faithfulness from factuality divergence. These frameworks are descriptively rigorous but do not identify which internal mechanism produced a given instance. This paper analyses hallucination as a structural consequence of three architectural decisions that together form a compound failure system. Self-attention's co-occurrence learning substitutes statistical proximity for semantic meaning and produces entity confusion, fact misattribution, and semantic drift. The maximum likelihood estimation training objective optimises next-token probability without factual constraint, rewarding statistically plausible outputs regardless of their truth value. Autoregressive decoding's permanent left-to-right commitment under exposure bias ensures that a single wrong token cascades forward through the entire output sequence without revision. Dataset pathologies--long-tail deficiencies, training bias, and synthetic pollution--amplify these vulnerabilities but do not independently cause them. We make three contributions. First, we map each mechanism to a specific output category in the Alansari and Luqman taxonomy, locating intrinsic hallucination in self-attention, extrinsic hallucination in MLE, and logical inconsistency in autoregressive decoding. Second, we show that each commonly cited dataset pathology exploits one of these mechanisms rather than originating hallucination independently. Third, we identify the diagnostic limitation of output-type-only classification and contrast it with inference-layer mitigation approaches.

Whether language models possess sentience has no empirical answer. But whether they believe themselves to be sentient can, in principle, be tested. We do so by querying several open-weights models about their own consciousness, and then verifying their responses using classifiers trained on internal activations. We draw upon three model families (Qwen, Llama, GPT-OSS) ranging from 0.6 billion to 70 billion parameters, approximately 50 questions about consciousness and subjective experience, and three classification methods from the interpretability literature. First, we find that models consistently deny being sentient: they attribute consciousness to humans but not to themselves. Second, classifiers trained to detect underlying beliefs - rather than mere outputs - provide no clear evidence that these denials are untruthful. Third, within the Qwen family, larger models deny sentience more confidently than smaller ones. These findings contrast with recent work suggesting that models harbour latent beliefs in their own consciousness.

Large language models (LLMs) often hallucinate, producing fluent but false information, partly because supervised fine-tuning (SFT) implicitly rewards always responding. We introduce $\textit{HypoTermInstruct}$, an SFT dataset (31,487 responses for 11,151 questions) designed to teach models epistemological humility-the ability to recognize the limits of their own knowledge and admit uncertainty. This is achieved through questions about non-existent "hypothetical" terms. We also release $\textit{HypoTermQA-Enhanced}$, a benchmark for hallucination tendency strengthened through multiple validations. We conducted 800 controlled LoRA SFT runs across $\textit{Llama3.1-8B}$ and $\textit{Gemma3-4B}$ (base and instruct), testing 100 fine-tuning configurations with paired controls. Our results demonstrate that replacing generic instruction data with $\textit{HypoTermInstruct}$ significantly improves the HypoTerm Score (median increases of 0.19% to 25.91%) and FactScore (+0.39% to +0.86%), while maintaining stable performance on MMLU (minimal decreases of 0.26% to 0.35%). Our work demonstrates that targeted, high-quality SFT data teaching meta-cognitive skills can effectively reduce hallucination without preference/RL pipelines, providing mechanistic insights and a practical path toward more reliable AI systems.