There is a LessWrong wiki entry for just this problem: https://wiki.lesswrong.com/wiki/Simulation_argument
The rabbit hole problem is solved by recognizing when we have made the best determination we can with current information. Once that is done, we stop.
Understanding that beliefs are our knowledge of reality rather than reality itself has some very interesting effects. The first is that our beliefs do not have to take the form of singular conclusions, such as we are or are not in a simulation; instead our belief can take the form of a system of conclusions, with confidence distributed among them. The second is the notion of paying rent, which is super handy for setting priorities. In summary, if it does not yield a new expectation, it probably does not merit consideration.
If this does not seem sufficiently coherent, consider that you are allowed to be inconsistent, and also that you are engaging with rationality early in its development.
The rabbit hole problem is solved by recognizing when we have made the best determination we can with current information. Once that is done, we stop.
If inference to the best explanation is included, we can't do that. We can know when we have exhausted all the prima facie evidence, but we can't know when we have exhausted every possible explanation for it. What you haven't thought of yet, you haven't thought of. Compare with the problem of knowingly arriving at the final and perfect theory of physics,
If it's worth saying, but not worth its own post, then it goes here.
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