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Then why simulate the suffering, and especially why do that in all the sick ways that exist? Out of cruelty? Or sporting?

Just choose a disease and go for a 10 minute Wikipedia rabbit hole.

If cruelty exists in their world, then empathy and caring must exist too.

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If this is a simulation, it could have been “created” as a set of physical rules (which we perceive as physics). Everything that happens within it could have just evolved naturally from those rules. For example, maybe the Big Bang was the initialization of the simulation. Life wasn’t explicitly programmed into it, but it just happened after running the simulation for billions of years. Now that life exists, along with the pleasures and suffering that go along with it, this higher intelligence could step in and change it, but that would certainly corrupt the natural progression of the simulation.

I like to think that whatever happens here is insignificant in the big picture, and that's why bad things happen and divine intervention doesn't routinely occur.

I can't explain why its insignificant, of course. It's like a hydrocarbon combusting in your car engine, and the rest of the little molecules wondering what kind of a monster could do that to them. We humans aren't even aware that it could be a problem.

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