"The best example I heard was this: say you're a baker and you sell bread. One day it starts raining bread, and people pick up their bread from the street rather than pay for yours. It sucks for you that you aren't getting money from your bread, but how can you blame people for what they're doing?"
Inaccurate analogy. The baker played no part in making it rain bread. Software developers and other producers of content invest their time, money, and life into creating the product that gets disseminated. If they see that the product of their labor will get pirated, they will be less inclined to innovate and produce more in the future.
"Price is dictated by supply and demand, and there's now a supply which is infinite and therefore, by traditional economics, surely it should be free?"
No. You are committing the fallacy of confusing descriptive economics with normative economics. Saying what will be is not the same as saying what should be. As an example: if I hack into your server, steal your startup's source code, and release it on BitTorrent, your startup's product will become free. That doesn't mean it should be free.
I disagree that it's an inaccurate analogy, but I agree that piracy will reduce innovation in its current state. I'm saying that, as it stands, the fundamental idea of selling something which is free to duplicate is broken.
What if instead of raining from the sky, bread was atom-for-atom replicated from the original baker's product (bakers only input is "design" -- no raw materials). Would eating the clone-bread constitute theft?
Inaccurate analogy. The baker played no part in making it rain bread. Software developers and other producers of content invest their time, money, and life into creating the product that gets disseminated. If they see that the product of their labor will get pirated, they will be less inclined to innovate and produce more in the future.
"Price is dictated by supply and demand, and there's now a supply which is infinite and therefore, by traditional economics, surely it should be free?"
No. You are committing the fallacy of confusing descriptive economics with normative economics. Saying what will be is not the same as saying what should be. As an example: if I hack into your server, steal your startup's source code, and release it on BitTorrent, your startup's product will become free. That doesn't mean it should be free.