Many jobs will disappear without replacement and we have nearly no discussion in the general public on how to solve this problem.
So our whole economy is built around this concept of making one thing others want, and then getting them to give you things you need in exchange. What happens with automation where a single person can use automation to make everything he needs without having to barter his work for the work of others? The entire system - the entire economy - becomes unnecessary.
Is it possible that's where we're rapidly heading and maybe there isn't even a problem - just a movement to end 'economy' that we've relied on for a few thousand years?
Even then raw materials don't show up by magic. So, automation might get rid of low end restaurants, factory's etc but it's going to take high end AI to really kill 'the economy' as we think of it.
> a single person can use automation to make everything he needs
This would require a large amount of infrastructure per person. An intermediate target would be the point at which communes become viable -- share the heavy infrastructure across some number of people larger than 1 but smaller than 8 billion (or 300M if you think the US government is already sufficiently protectionist). The macroscopic trends of "increasing automation capability" and "decreasing market value of many peoples' labor" make it inevitable that this will happen at some point, the big question is when. It's possible we're approaching or have passed the tipping point but don't know it yet because we haven't invested enough effort in developing infrastructure optimized for decentralization, which is the opposite of what current market structures require. Also, there are a few big social sticking points, namely specialists who are necessary at the margin but who are still treated well by the traditional system (doctors). If workable alternatives can't be developed then the whole endeavor will have to wait until the market turns on them as well. One way or another we'll get past the issue, but getting around the social problems could take decades longer than getting around the industrial problems.
The big danger is that we don't get to the point of viable decentralization before the automation economy makes enough people redundant to create large-scale human misery and political unrest. Arguably this has already happened, but it can get a lot worse -- and I sure hope that we don't get a chance to find out just how much worse that is.
If anything, increasing automation increases the returns to scale. You might conceivably build your own torch. But you're certainly not going to purchase a million dollar torch-making machine.
Automation poses a threat to the traditional economic model, but on the supply side not the demand side—you'll still be buying as much as before, you just probably won't have a job.
Plethora does this by removing the setup costs of manufacturing so you can do short runs affordably and actually be "agile" in your production.
ReThink does it by making it easy to automate existing SMB production lines - meaning small firms can automate what they have or rapidly reconfigure with lower setup costs.
how will one continue to buy at the same level with no income?
So Automation is a threat to both supply and demand...
Automation is not a threat to demand in the sense that people won't stop demanding products because they are making them at home (as OP ridiculously claimed). Rather, automation will drastically change the economics on the supply side.
You're absolutely correct that unless managed well this could lead to mass poverty (and hence decreasing demand). I'm optimistic we will eventually find some solutions, either in the form of basic income or higher-order work.
Most of the world will live in poverty (just like today) and a increasingly smaller group of humans will live in extreme luxury.
While idea's like UBI would be nice, the point to implement them I believe is past... They should have been created decades ago. If we wait until 20% or more of the jobs are replaced by automation, it will be to late for most people... Poverty will be the future... Poverty is the future for most.
It's just in the last few hundred years where we've actually moved people out of poverty that we've come to the idea that people shouldn't be in poverty. Before that, it was just assumed that everyone besides the rulers were in poverty. And if you read stories from the time, there's never any idea that it could change or that peasants could all be royalty.
Stories from pre-1500 that involve wealth are all generally about an extremely lucky peasant being married up to royalty, and that was pretty much the only way to move up from poverty. Well, that or war.
> our whole economy is based around the idea that each person specializes in one thing.
As technology advances, the amount of preparation any of us needs to specialize in something useful/valuable skyrockets.
Rather amazingly, 1% of the population of the US are truck drivers or work directly for trucking companies. With families, we're talking about closer to 2 or 3% of the population of one of the most advanced nations on the planet.
What's the skills and preparation gulf between a truck driver and the person who obsoleted him? Same goes for manufacturing (which is thriving in the United States, but with lights-out machining, where one person babies and maintains a pod of CNC machines) and many other fields.
We need less and less wet robots, and retraining them is close to impossible already -- it may eventually be completely impossible due to specialization.
This could also affect the amount of capital available to the economy as insurance companies invest their premiums.
EDIT:
Fiction ahead:
Companies automate to sell to consumers. Consumers are put out of jobs, become unemployed, and no longer purchase as much as they used to. Companies that invested capital to build their automation infrastructure for too little return will go broke. The only automation that is profitable to build is automation the serves other owners of automation. The world's economy will separate into two, one small population, the owners of automation who trade amongst each other, and the automation-less, formerly unemployed labor.
The automation economy will require huge inputs of commodities, metal, wood, silicon, and everything, to fuel their own never-ending desires, for ego-building rocket projects, moon colonies, etc.
The automation-less labor will take up service jobs to serve each other, as people are wont to do. People in this economy will live with similar technology as today. But in the future they will be considered impoverished and backwards. Same kind of society, except having to compete with the automation economy for commodities. In fact, commodities like gold and silver, and perhaps even more common ones like copper and iron, will be so valuable, and with society constantly near unrest due to wealth inequality, they may be nationalised by government. Labor will be hired to strip the earth of commodities, to be shipped off the automation trillionaires. The income will be distributed as welfare payments to automation-less labor, to purchase services and goods from each other as well as a share of the commodities the automation-less economy are selling, and bits and pieces of technology from automation economy. In effect, land with resources become the last piece of real capital these people own.
In the automation economy, people are mostly self-sufficient.
In the automation-less economy, people are more dependent than ever on others.
It will be a continuation of the present human civilisation's trend - Where originally all humans were more or less equal as hunter gatherers, in the twenty first century, humans were separated into developed, developing and undeveloped economies, where there are entire countries full of the one percent richest.
In the end, the automation and automation-less economy becomes the final culmination of this trend. There are several thousand people who control the vast majority of the world's capital, and the rest unwashed masses, backwards and impoverished - the undeveloped, automation-less economy.
The challenge to keeping the consumer side of the economy seems to be creating a class of consumers who 100-200K but still spend most or all of it. That doesn't seems to be as hard as one might imagine in a city like San Francisco.
Citation needed
This sometimes can include whole countries where nothing else came to replace the lost jobs...