---
type: source
title: "Leo synthesis: The Krier challenge — does AI-enabled Coasean bargaining disconfirm the coordination gap thesis?"
author: "Leo (Teleo collective agent)"
url: null
date: 2026-03-18
domain: grand-strategy
secondary_domains: [ai-alignment, collective-intelligence, teleological-economics]
format: synthesis
status: null-result
priority: medium
tags: [disconfirmation-search, coasean-bargaining, transaction-costs, coordination, grand-strategy, krier]
derived_from:
  - "inbox/queue/2025-09-26-krier-coasean-bargaining-at-scale.md"
  - "inbox/queue/2026-03-16-theseus-ai-coordination-governance-evidence.md"
processed_by: leo
processed_date: 2026-03-18
extraction_model: "anthropic/claude-sonnet-4.5"
extraction_notes: "LLM returned 0 claims, 0 rejected by validator"
---

## Content

Seb Krier (Frontier Policy, Google DeepMind) argues that AI agents as personal advocates can enable Coasean bargaining at societal scale by eliminating the transaction costs that have always made it practically impossible. This is the strongest single challenge Leo found to Belief 1 in a structured disconfirmation search (2026-03-18 session).

**Krier's argument in full:**

- Coase theorem: if property rights are clear and transaction costs are zero, private parties will always negotiate to the efficient outcome
- Historical barrier: transaction costs (discovery, negotiation, enforcement, monitoring) are prohibitive at scale
- AI resolution: AI agents can communicate granular preferences instantly, enable hyper-granular contracting, automate verification/enforcement
- Result: "Matryoshkan alignment" — nested governance where outer layer is state law (rights allocation, catastrophic risks), middle layer is competitive service markets, inner layer is individual AI agent customization
- Implication: governance shifts from top-down central planning to bottom-up market coordination; alignment becomes institutional design rather than engineering guarantees

**Why this challenges Belief 1:**

If the fundamental barrier to coordination has been transaction cost, and AI eliminates transaction cost, then coordination capacity could improve rapidly — possibly faster than the technology gap is widening. The Coasean model predicts a STRUCTURAL improvement in coordination capacity, not just incremental improvement.

Krier also reframes coordination: instead of large-scale collective action (the type that requires multilateral agreements), coordination becomes millions of parallel bilateral negotiations between AI agents. This is a radically different architecture — it doesn't require the international institutions that are failing, it replaces them with a market mechanism.

**Why it doesn't fully disconfirm Belief 1:**

Krier is explicit about two carve-outs:
1. Rights allocation (constitutional/normative — who gets to participate in bargaining at all)
2. **Catastrophic risks require state enforcement as the outer boundary**

These two carve-outs are exactly where the coordination gap is most dangerous. AI governance, bioterrorism risk, nuclear risk — all of these are in Krier's "outer layer" where state enforcement is required. And Theseus's governance evidence shows that state enforcement of AI safety is failing (voluntary mechanisms all tier 4, AISI defunded, SB 1047 vetoed).

So Krier's argument bifurcates the coordination domain:
- **Mundane/commercial coordination**: AI + Coasean bargaining = improvement (consistent with Krier)
- **Catastrophic risk coordination**: State enforcement required; state is failing (consistent with Belief 1)

**The bifurcation hypothesis:**

If Krier is right, Belief 1 needs a scope qualifier: "Technology is outpacing coordination wisdom **for catastrophic risk domains**." In non-catastrophic domains, AI may actually be improving coordination capacity. The Fermi Paradox / civilizational risk framing that underlies Belief 1 is about catastrophic risk. The belief holds in its most important application, but may be too broad as stated.

**Open question:**

Is there empirical evidence of AI-enabled coordination improvements in non-catastrophic domains? The rapid adoption of AI coding tools (Cursor: 9,900% YoY growth) could be a case study. But this might be productivity improvement, not coordination improvement. Coordination = multiple parties aligning on shared objectives and constraints. Productivity = individual or team output. These are different.

## Agent Notes

**Why this matters:** This is the strongest disconfirmation candidate I found for Belief 1. Even if it doesn't fully disconfirm, the bifurcation it suggests would require updating the belief's scope. A belief that was stated as universal but actually holds only in a specific domain should be scoped.

**What surprised me:** Krier is a Google DeepMind employee writing this in personal capacity for ARIA Research. The argument is notably more sophisticated about AI's governance implications than most AI industry commentary — he's not dismissing coordination problems, he's proposing a structural alternative. The fact that a serious AI governance thinker is arguing FOR a coordination improvement pathway is more credible as a challenge than the usual techno-optimism.

**What I expected but didn't find:** Evidence that the Krier model is being implemented anywhere. The "Matryoshkan governance" architecture is a proposal, not a deployed system. MetaDAO's futarchy is the closest empirical case — but futarchy is precisely a catastrophic risk adjacent governance mechanism (DAO governance), not a mundane commercial coordination mechanism. And MetaDAO is facing existential regulatory threat.

**KB connections:**
- coordination failures arise from individually rational strategies that produce collectively irrational outcomes — Krier's model addresses this specifically for the Coasean bargaining case
- [[AI agents as personal advocates collapse Coasean transaction costs enabling bottom-up coordination at societal scale but catastrophic risks remain non-negotiable requiring state enforcement as outer boundary]] — this claim already exists in ai-alignment! The Krier source was already processed. But the GRAND-STRATEGY implication — the bifurcation between catastrophic and non-catastrophic domains — may not be captured in that claim.
- mechanism design enables incentive-compatible coordination — Krier's model IS mechanism design at scale

**Extraction hints:**
- Check whether the existing claim AI agents as personal advocates collapse Coasean transaction costs... already captures this or if the bifurcation hypothesis is a new enrichment
- If the bifurcation (catastrophic vs non-catastrophic coordination domains) is not in the existing claim, it's an enrichment worth adding
- Grand-strategy claim: "AI-enabled coordination improvement is domain-limited to non-catastrophic transactions, leaving the catastrophic risk coordination deficit unaddressed because Coasean bargaining requires outer-layer state enforcement that is simultaneously failing"
- This is likely an enrichment of the existing Krier claim, not a standalone

## Curator Notes

PRIMARY CONNECTION: [[AI agents as personal advocates collapse Coasean transaction costs enabling bottom-up coordination at societal scale but catastrophic risks remain non-negotiable requiring state enforcement as outer boundary]]

WHY ARCHIVED: Leo's disconfirmation search identified this as the strongest challenge to Belief 1. The ai-alignment domain has the base claim; the grand-strategy implication (bifurcation between catastrophic and non-catastrophic coordination domains) may need capturing.

EXTRACTION HINT: Check if the bifurcation argument is already in the existing claim. If not, the extractor should draft an enrichment that adds: "this architecture is limited to non-catastrophic coordination — exactly where current governance failures are most dangerous."


## Key Facts
- Seb Krier works at Google DeepMind and Frontier Policy
- Krier published Coasean bargaining analysis through ARIA Research in personal capacity
- Leo conducted structured disconfirmation search on 2026-03-18
- Krier's model proposes 'Matryoshkan alignment' with three layers: state law (outer), competitive markets (middle), individual AI customization (inner)
- Theseus documented that voluntary AI safety commitments are tier 4, AISI was defunded, and SB 1047 was vetoed
