The more complicated situation, which we are presently experiencing, is that where a 3rd world country with a massive population is given the technology to essentially overnight (ok, one decade) be able to perform manufacturing for virtually the entire planet, at labor rates that make robots look expensive, not to mention they are capable of far more diverse tasks.
I think society has the ability to adapt and diversify fast enough to keep up with our technical innovation, but I don't see any way that we can adapt fast enough to handle the ultra-rapid industrialization of China, especially considering their seeming willingness to work 70 hour weeks for wages that are miniscule compared to the value of their output.
I just don't see how China can manufacture basically everything for us (there is still more that hasn't been outsourced, but will), we outsource whatever information based services we can to India, and we sit here and cut each others hair and build each other beautiful houses, while they live in shacks and share one bathroom between 20 people in workers dorms.
And what do we send them? Pieces of paper with ink on them. Which they use to buy our government bonds.
If overseas workers don't start charging more for their labor, thereby being able to actually consume some of their output, I don't see how there is a happy end to this story in the medium term.
Okay, I'm kidding, of course, and I struggle with this all the time. I mean, if a factor that used to require 1000 people to build cars now only requires 100, or 50, or 1 or 0 or whatever, then what happened to the rest of the workers?
They have moved on to auxiliary industries such as engineering (somebody needs to design the robots right).
The endgame, however, will be the mechanized production of everything. At that point, energy will be the currency (instead of labor..think about it, paper money is just a unit of time*energy). If we can tap the near-limitless supplies of energy from fusion, we will have achieved a nearly Utopian Society.
The plow (and other technological advances) did make the farmer (relatively) obsolete. The great majority of farmers have gone out of business in the last hundred years or so. That's why there are so few farmers now.
The former farmers found jobs because plows can't work at factories, call centers, KFC, etc. Sufficiently smart robots could. That's why analogies with previous technological advances don't work.
A more relevant comparison would be with horses and machines that replaced them pulling plows, hauling stuff, etc. Where are all the horses, mules and oxen now? Were they freed from unnecessary drudgery to specialize in labor where they had a competitive advantage, or did they suffer severe declines in number, surviving essentially as pets and museum pieces?
Once there is no work that humans do better than robots, there will be no work for humans to do. This could be very good, or very bad. We're not yet to that point, however.
1. What stops the engineers from becoming obsolete? We're just further down the line.
2. Only a relatively small percentage of the population has the skills for creative scientific and technical work such as programming and engineering. (Let's say 20%.) Once robots can do all of the work of individuals 90IQ and below, what do you do with these people?
"God, I'm so fucking angry. My brother doesn't care about the pay. He just wants the chance to be out there with people - to feel the same sort of satisfaction that all of us working stiffs experience from knowing we've contributed, however marginally, to the human machine. The kind of satisfaction that only a job can provide.
He's upstairs crying right now."
(Note: I am not suggesting that anyone is owed a job, here, but rather that there is a dignity involved with being able to contribute to society in some fashion, and that we could see instability with a lack of outlets for individuals.)
We already see the problems in Detroit with the lack of jobs and ability to get out. While some of these people could be retrained into other fields, many cannot. We have to figure out how to keep them integrated into society, or present an alternative path.
3. Perhaps we see the example from Elf Sternberg's utopia world -- he presumed that in societies with no need for human production that people would create what they enjoyed and that the system would move to a gift culture. Perhaps. Even with power, however, we're still looking at some way to ration resources...
Regarding your first point... Only a stupid engineer would design a robot that could do his job for him. Robots designing robots? Where have I heard that before? Oh yeah... Terminator!
The issue is the transition; if you continue with our present economic model, as well as the prevailing cultural attitudes in the U.S., more and more workers will be marginalized, and if police and military forces can themselves be swapped out for robot counterparts, a revolution against 'The Man' becomes all but impossible.
Of course, you can stop that from happening by creating 'comfortable enough' homeless shelters, and lacing the food with appropriate chemicals. The poor masses will be happy, fed, and clothed for a minimal amount of money, and can be quite easily swept under the rug.
I don't think this is terribly far-fetched; culture in the U.S. seems to be highly focused on 'who has more', which is meaningless and self-destructive in a society that can readily satisfy the needs and wants of all of its inhabitants.
It means we will need to change our economic systems to adapt to that reality. Otherwise, Manna might be the result.
So, as sci-fi that makes you think, I find it useful.