The fallacy goes like this "Breaking a window must be good for the economy because it employs glaziers". It is false because, although the glazier (window repairman) gets work, the person whose window got broken loses (and therefore does not spend elsewhere) at least as much money.
In the case of IP there is a benefit to the inventor/author/IP-owner (just like for the glazier) and there is a broadly spread cost (just like the person whose window it was and those she would otherwise be spending money with). However, there is a key difference: in the case of the window, nothing new was added. In the case of IP (patent and copyright, not counting trademark, trade secret, right of publicity or others), the inventor/author/etc creates something NEW, which benefits all of society, and which they might not create if they were not motivated by the IP rights.
Notice how this argument shows us what could go WRONG with IP law so that it was no longer a net benefit to society. If the rights granted to the individual are significantly more than it takes to motivate them to create (such as copyrights that last for many decades after the author's death) or if the IP grant is given for something that does not benefit society (such as patents on inventions that anyone could have thought of) then IP law is no longer benefiting society as a whole.