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Radiation isn’t that big a deal. If you have a large enough structure for a colony, or even large enough for 50 people, then you have plenty of mass for radiation shielding. At that scale it’s a non-issue.
Psychological issues from being in cramped ships for so long.
Well, only at first… Families don’t want to live in cramped ships, so they won’t. They’ll live in artificial habitats with grass and open spaces. Eventually they’ll be large enough to have rivers and mountains.
But even without all that, just ask anyone who’s served on a submarine if it’s possible to survive in cramped quarters. It’s doable.
I do want to say that you’re totally right about space based manufacturing key to any real expansion into space. I mean automated would be nice, but it’s not totally necessary. Getting manufacturing to work in space at all is going to take some serious experimentation, so it can’t really start 100% automated. But on the other hand, I do expect robotic drones to play a major role, even in the beginning.