For contemporary economists (e.g. Adam Smith), transportation horses were capital, not labor.
What happens when we develop technology which can do 99% of what a human can do better, faster, and cheaper?
With previous innovations, there was always something else that a displaced human worker could find to do. What happens when 99% of human jobs are gone?
No it doesn't. Capital becomes obsolescent, labor does not.
>What happens when we develop technology which can do 99% of what a human can do better, faster, and cheaper?
During 99% of recorded history, agricultural labor was the prevailing definition of "what a human can do".
I'm not talking about the prevailing definition of what a human can do. I'm talking about the actual fact of what a human can do.
You still haven't addressed the question of what will happen when nearly everything which a human being is capable of can be done better by a machine.
This holds even for the scenario of AI becoming a very close substitute for humans. The economic pressure, however, is to develop AI in directions that are complementary to human abilities.
If and when the robot dream is finally realized, it would be novel insofar as it involves the unprecedented production of laborers through an economic process. The debate over the effects of bringing new workers into the economy has, however, been played out many times. (E.g. regarding cheap robots for unskilled work cf. Chinese immigration in the 19th century.)
I'm not sure why you ask me for a reference for a claim I didn't make. I claimed that labor and capital are substitutes as inputs to production. I also claimed that an inferior or more expensive substitute may go unused when a better alternative becomes available.
Do you disagree with any of these claims?