Suppose a strong epistemic preference for simpler theories of the world. One might then think that a simulation hypothesis is automatically more complex than the best physical story about our world, because in addition to all the complexity of our simulated cosmos, it includes the complexity of whatever physical cosmos houses the hardware running the simulation.
But this need not be the case. The best physical story about our world makes our world include vast amounts of information that would not need to be included in the simulation. To simulate the history of the human race, we at most need information on the particles wihtin a sphere of radius about a hundred thousand light-years, so basically just the Milky Way Galaxy, a very small fraction of the particles in the world. And even that is a vast overstatement. One can surely have a low simulation resolution for a lot of stuff, simulating things only on a macroscopic level, and only including particle-level information when the simulated humans peer into scientific instruments. So the information content of the simulation software could be much, much lower than the information content of the physical world that our best theories say we live in.
But what about the simulation hardware itself? Wouldn’t that need to live in a complex physical universe? Maybe, but that universe need not be as complex as our physical theories claim ours to be. It could be a universe that has a level of physical complexity optimized for running the computing hardware. The granularity of that universe could be much coarser than ours. For instance, instead of that universe being made of tiny subatomic particles like ours, requiring many (but fewer and fewer with progress in miniaturization) particles per logic gate, we could suppose a universe optimized for computing whose fundamental building blocks are logic gates, memory cells, etc.
I am dubious, thus, whether we can rule out simulation hypotheses by an epistemic preference for simpler theories. The same goes for Berkeleian skeptical hypotheses on which there is no physical world, but we are disembodied minds being presented with qualia.
And of course the “local five minute hypothesis”, on which the universe is five minutes old and has a radius of five light-minutes, posits a world with intuitively much less complexity than the world of our best theories, a world with vastly fewer particles.
But if we cannot avoid skeptical hypotheses on grounds of complexity, how can we avoid them?
My current view is that we simply have to suppose that our priors are normatively constrained by human nature (which on my Aristotelian view is a form, a real entity), and human nature requires us to have non-skeptical priors. This is a very anthropocentric account.