Earlier quoted context omitted.
The lambda calculus was never meant to be a "practical FP language"; it predates programming languages and even mechanical stored-program computers as we understand them.
What are the useful cases of the Y combinator then? (I don't say that the lambda calculus is useless, I was responding to a comment that claimed the lambda calculus is useless without the Y combinator.)
so when you're faced with a formal system that doesn't seem to support indefinite iteration, perhaps because you are trying to design it to guarantee termination, a useful exercise is to try to construct an analogue of the y-combinator in it
if you can't, you may have gained enough insight into the problem to show that the system actually does guarantee termination, and maybe even show useful time bounds on it
if you can, you have usually shown the system is turing-complete, which means you can appeal to rice's theorem whenever you are tempted to analyze the behavior of the system in any way, so you can satisfy yourself with partial decision procedures that work often enough to be useful and are conservative in the appropriate way, rather than wasting time trying to find a complete solution
(also if you're designing the system you might consider either supporting iteration more directly or removing the back door)
every once in a while it's also useful in practice to be able to program a weird machine, too