I watched "Free Guy," but I won't be writing a review about it when you can just go over to Liminality and read Charles's magisterial meditation on the film and the story's largely unexplored philosophical issues. There's little for me to add to Charles's thoughts as he's covered all the basics.
I'll note that the question of AI becoming sentient, and what to do with it, was a pet subject of "Star Trek: The Next Generation," which devoted many episodes to exploring various versions of this issue. One episode that comes to mind ("Ship in a Bottle") deals with the holodeck program of Moriarty, the fictional nemesis of Sherlock Holmes who, in this scenario, becomes sentient. Ultimately, the Enterprise crew conclude they cannot kill what is essentially artificial life, so they defeat Moriarty by trapping him, without his knowledge, in a simulation within a simulation, thus keeping him alive and happy, able to have his own adventures within his pocket universe. In "Free Guy," main character Guy ends up in a similar situation, although he's aware he's inside a simulation that depends on hardware for its continued existence.
The movie does indeed gloss over any serious attempt to grapple with the issues of artificial life, consciousness, and intelligence (and as Charles points out, these are all different animals). It does, however, come to much the same conclusion I have regarding whether we are all currently living in a simulation: we ourselves might be simulated, and there might be a "realer" reality out there, but that doesn't make our lives meaningless. This is actually an ancient problem faced by many religions, which posit that the world we know isn't the realest or most ideal world, but merely an illusion or a "fallen" version of a better world. To say "we live in a simulation" is just a modern version of saying we live in an inferior version of reality. The analogy between ancient thought and modern fiction isn't perfect (e.g., some religious people would claim that our soul or consciousness is the realest thing about us, and when we die, we move on to "a better place," whereas for computer simulations, if you pull the plug on them, there's no moving on), but it works on the grand scale.
Neil deGrasse Tyson was asked about the so-called "simulation hypothesis," which is most closely associated with philosopher Nick Bostrom (type "bostrom" and "simulation" into my blog's search window to find other posts I've written on this topic). Tyson's answer was interesting. He framed the simulation hypothesis this way (which is not the way Bostrom described it): are we in a simulation such that a first universe got clever enough to create a perfect universe-simulation, and then that simulated world created its own simulation, etc., until we reach some final world where the people haven't yet figured out how to create their own perfect simulation of the cosmos? If so, then given the current evidence, i.e., that we manifestly do not know how to create a perfectly simulated universe, either we must be that first world (and thus yet to create any universe-simulations), or we must be that last world (the "dumb" world that still hasn't figured out how to create its own simulations). Tyson concludes that he knows which world he's betting we're in. This is something of a non-answer, when you think about it, and there may be reasons to question how Tyson has framed the question, but Tyson's answer is still worth chewing over.
Anyway, "Free Guy" is funny, fluffy entertainment, but it certainly doesn't hold up to close scrutiny. Turn your brain off and just enjoy the visuals.
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