Nobody's saying piracy is <i>right</i>.  Just that it's a natural, predictable occurrence that will be part of any digital economy, and that any realistic theory of markets needs to account for it.  Most Econ 101 treatments assume full compliance with laws, which in this case is an absolutely devastating assumption, because supply and demand don't tell us much at all when copying is as easy and anonymous as it is.<p>The problem: economically, in many (most?) cases piracy <i>is</i> the rational choice.  If I want a product that is sold for $20, but it's available for free (illegally) as a torrent, then I have to weigh the $20 savings vs. the risk of being caught and the financial penalty if caught.  Since the risk of being caught is extremely small, well under 1% (practically zero in some cases), even a several thousand dollar fine is not enough to tip the scales in favor of purchase.<p>...until we consider morals, which in a sense can be considered to have financial value.  To some people, the desire to "do right" is worth a lot, enough to make piracy "cost" more than the purchase.  But for many more, the moral value of paying for a game/CD/movie/etc legitimately does not balance out the gain they would receive by pirating.  These decisions depend on the particulars, obviously - if you like the artist, you'll assign a higher moral value to paying them, and if you hate a company, you're not going to give a second thought to pirating their software.<p>Put another way: do you feel $9 worth of bad when you pirate a $10 CD?  If not, then you are making the wrong decision when you pay for it.<p>The original claim is correct, but in a roundabout way: piracy is (at least in part) a result of the fact that prices are higher than the moral cost that people suffer when they pirate them, and it should be exerting a downward price pressure to normalize the two factors (actually, it should be applying a downward pressure only until an optimal point - there are many subtleties involved in figuring that point out, and I'm not actually sure that we're <i>too</i> far off from it, but I'll leave speculation about that for another rant...).<p>Groups like the RIAA have tried to respond by raising the cost of piracy instead of lowering the cost of purchase (these costs include things like inconvenience, payment hassles, etc).  It seems unlikely that they will be able to push the average cost to a pirate high enough, though, unless they can massively increase the enforcement rate, which is rather unlikely.  So we're stuck in a bit of a market stalemate.<p>The upside (depending on your POV) of which is that it's pretty much a no-brainer for a lot of people to pirate a lot of stuff, and they're getting loads of value for very little cost.<p>Edit: Yes, I <i>am</i> suggesting that instead of price approaching marginal cost ($0), it should be approaching the less tangible "I'm a bad person" moral cost that people incur when they don't pay for something, plus the inconvenience cost of pirating, both of which are usually (but not always) nonzero.  Note the difference between this and donation systems: the crucial difference is that the "I'm a good person" value that people get by donating to an artist is not equal to the moral value they lose by pirating, which is typically higher.  I suspect it <i>is</i> better to charge for something, even if you know and accept that some people will pirate it, than to give it away for free and solicit donations.