Economists call this the "Free Rider" problem: people are able to derive value from a common good without paying for it, so there is less incentive to produce the type of good than would be optimal.
Roads. Infrastructure for sewers. Defense. Fire suppression.
These are all cases where a purely free market fails to provide optimal levels of the good or service.
People are evidently willing to pay for novels, so we know they have value. The question is whether the current copyright system gives copyright owners too much power to extract rents at the cost of the public domain.
