I think the Minecraft analogy is illustrative. In Minecraft, you can use redstone circuits to construct logic gates, and use those gates to build computational

I think the Minecraft analogy is illustrative. In Minecraft, you can use redstone circuits to construct logic gates, and use those gates to build computational devices that are Turing-complete, in theory. But it's not possible to scale such devices up arbitrarily; you can build a simple CPU, but nothing that even approaches being able to run a nested copy of Minecraft. There are hard upper bounds on the amount of data that the simulation can cope with at once. (You can imagine patching Minecraft to allow keeping more chunks loaded at once, but you can't scale it up by very many orders of magnitude before you end up with something that can't run efficiently on any hardware that physically exists.) Similarly, as Scott Aaronson describes in the article we're discussing, it's likely that there are finite bounds on how much computation can possibly be done before the heat death of our own universe. So it's fair to be skeptical that a tower of "turtles all the way down" could ever possibly exist, at least on a universal scale. If there's no tall hierarchy, then the anthropic argument (which says that we're unlikely to be at the top) breaks down. You can certainly hypothesize higher levels which have infinitely fast communication, or other kinds of special properties that make deep simulations more feasible. (Greg Egan proposed one such cosmology in his novel Permutation City.) But you don't get to assume that and still use simulations within our own universe as examples, because you're talking about something entirely different.