if they can't actually profit or make real money doing it. meaningful innovation would cease or slow significantly.
Of course it would.
There is a plethora of material to demonstrate exactly that.
Basic human nature:
Why study, when cheating (stealing IP) on exams is free?
"Dude, I have as much right to your exam knowledge as you do."
The long term impact is significant, but instant gratification types don't focus on long term.
Living within the cocoon of an American IP stimulated world, it is easy to ignore the effects of decreased IP reward abroad on effective R&D. Most notable is that effect in communist and/or heavily socialist societies. The amount of original material generated via those countries is negligible. Like Josh and Wiki, they are happy to steal the work of others. But as with Josh and Wiki, there are limitations on their capacity because of that tact.
Josh, Wiki, and others of the ilk are essentially little kids pocketing a piece of candy or two from Wal-Mart, and as a result of that "freedom," dreaming of a day when Wal-Mart's Flat Screen TVs will be "free" as well.
In terms of costs, as is the case of any theft, costs are absorbed by the rest of us. Those costs are significant, and they extend beyond any simple financial costs circumvented by thievery. For example, instead of opensource software being routinely employed, we all have to endure the pita of closedsource crap as a direct result of intellectual piracy. In the case of Obama's forced EMR, or Medical enterprise software that closedsource cost impacts patients dearly. At some point Josh and Wiki will be patients too.