Not necessarily. Consider music, where artists have more potential to make money from live performances than they do from album sales, the musicians would still create music but the sale-able service continues to be access see the musician live. I guess "the kinds of things people produce" would change in that they no longer "produce CDs", but really the musicians never really produced CDs anyway -- CD production was a side effect of the delivery of the content. What it would end up weeding out is the no-talent hacks and middlemen who are only in the industry to exploit the fact that things can not be easily copied by flooding the market with access and physical goods containing sub-par quality content. Because there are fewer creators, the supply goes down, and thus value, of the product in general (not a specific instance of the product), goes up. People still produce music, but since there are no arbitrageurs, the market is more efficient.

In some sense, copyright leads to a less efficient market as actors arise to exploit and abuse the rules of copyright, which creates a derivative market. The derivative, which is often times simply arbitrage, has no more, and often less, right to exist than the thing it is based on. No one complains that easy copying is going to put CD manufacturers out of business (well, the MPAA tried, with their "Who Makes Movies?" campaign http://en.wikipedia.org/wiki/Who_Makes_Movies%3F ). A lot of of the talk about how copyright is valuable has to do with keeping the derivative market that copyright enables running, and ignores the true originators: the creators.

And then there's the tired position of why does the creation of art need to be tied to a market or associated with capitalism? Really, it's the existence of copyright that does the tying/associating, which explicitly outlines who has legal rights to economically exploit a work. One could argue that in a system where artificial limits like copyright don't exist, if any one person wants to make a living doing something but can not, then they shouldn't. Additionally, art that doesn't get made (for whatever reason) most likely shouldn't get made: if no one wants to have it made, not even the artist has a drive to create it, then it has zero value; however, this is a position that is just about as (un)testable as the opposite position that all art does have some value.