i do not agree with you that the failure mode is disaster. i suspect it is just more of the same dull march of the commoditization of the complement, labor.
maybe ai will close the loop and elasticity of substitution will climb above 1 in its own supply chain. maybe something breaks dramatically that way.
i tend to assume the desire for drama is itself cope. i suspect many of the flaccid dismissals and skepticisms here are coming from a similar assumption. they see that the dramatic version never happens, and so they conclude that anyone who is being dramatic (whether in the direction of hype or fear) is poorly calibrated. and they are on average right, so they learn to dismiss the drama. the muscle to dismiss the drama becomes very strong. you have to remember this: that they are right in their dismissal, even if the actual arguments they use to dismiss are essentially braindead. they are right to dismiss, because the dramatic possibility they are dismissing is at base the end of the world, by apocalypse or utopia. of course they are right. the end of the world is cope. drama is cope. but they are wrong because they underestimate the extent to which the predictability of their dismissal — the predictability of their complacency — makes them vulnerable to the diffuse, chronic, gradual forms of the machine's encroachment into our souls.
so i do not think we need your fancy theory for explaining why people are denying what is happening (and what has been happening, on more or less the same exponential, for hundreds of years). people do not need a reason to be complacent. people are by default complacent and by default correct in their complacency. but so is an ant.