Yes, there are algorithms that gain speed by trading memory for it even if the memory is slower than the processing element. But our computers are not theoretical turing machines with infinite ressources there are hard limits. One of these hard limits is direct 4GB adressing for 32bit architectures.
You do have a point in complaining about the high overhead approach forcing you to take refuge in disk IO, but that's an entirely different argument from saying that trading memory for clock cycles will backfire when an application fits in memory.
You're not saying anything I hadn't already covered. Yes, your points are correct, but you made the same mistake as the original poster of applying the "too much memory forces me onto disk" argument to the "cache misses are getting more and more costly" statement.
These have nothing to do with each other. To argue in favour of the latter, you have to show an example where trading code size for data size actually accelerated an application that had not hit the hard limit to begin with.
Note I did not comment on the "cache misses are getting more and more costly" statement. Although I don't want to follow the suggestion of trading code size for data size - not only because I believe that the disparity is not large enough to justify a trade yet in most cases but mainly because I frequently find data intensive designs much easier to maintain than code intensive ones -, I know that that statement is true and will at some point in the future require attention.
Makeshifts last the longest.
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