I would like help understanding this since it runs very counter to my understanding.

As I understand the economics of the photography market, there are several factors at work.

1) Equipment - this affects the source quality of a picture and thus how it will look when reproduced. Early on a limiting factor was very 'slow' film requiring long exposures, and also limits of grain size which required larger surface area to achieve line density that made it still look OK when enlarged for publication or posters.

Technology has really worked on this constraint, the latest tweak being large format digital sensors that can take 3 pictures of exceptional clarity in low light. This hugely reduced the 'cost' of quality both from an overall light capture sense, and in the opportunity sense where you can take 15 exposures where you might used to take exactly one and thus have a higher probability of getting the picture you like at the lighting opportunity rather than 'missing it' and having to go back the next day/year/whatever (sorry and that relates mostly to outdoor photography)

2) Population of quality photographers. This has been perhaps the most amazing impact of digital photography for me. Generally you get 'good' at taking pictures by taking a lot of pictures and seeing which are good and which aren't. In the film days there was a financial burden due to film developing and printing images which was a prerequisite to getting 'good' at photography.

Today you can take a thousand pictures a week in a variety of settings and environments, you can display them instantly 'poster' sized on a 55" 1080p television you can print ones you like at home on an ink jet printer up to 13 x 19. The change I see there is that for only an investment of time, one can practice photography. This has hugely expanded the number of people who have taken thousands of photographs. Combined with the internet (more on that shortly) and the community groups which provide feedback the number of quality photographers who are taking pictures is higher now than it has ever been.

3) Distribution and Discovery - prior to the Internet photographers had gallery showings, or they did freelance work for periodicals, or they were hired by advertising or modelling agencies. Finding them was 'hard' in the sense you needed a hook into the community and for photographers 'being found' was hard. Thus the 'known' good photographer pool was always smaller than the 'actual' good photographer pool. People who were 'known' reaped the benefit of that as there was an opportunity cost of trying to find another photographer once you had already found one.

The Internet changed all of that, you can find galleries 'online' in Flickr albums, G+ feeds, Facebook pages, blogs, etc etc. So in the past when someone found a photographer and they were thrilled to have found one, they were not in a very strong bargaining position if they thought the price being charged was high, since the cost of finding another photographer was higher still. But now that the cost of finding a photographer is much much lower, and the number of quality photographers is much much higher. The availability of good quality photographs has exploded.

The impact of that explosion is that it is impossible to sustain a price point that was established in a time of scarcity during a time of plenty.

So ripping off a photo is now 'easy' in the sense that people copy an image from a web site or off a flickr feed etc and don't pay the photographer. Of the cases I've read about on the web they have always been one of two situations:
1) The person doing the copying didn't realize what they were doing was illegal and once informed either:
a) Licensed the photograph
b) Used a different photograph because they felt the asking
price exceeded their internal notion of 'value' with
respect to using the photo.
2) The person doing the copying knew they were ripping it off and if they are caught they just move to a different picture. In every case I've read about if the photographer has to resort to suing the infringer they have always won.

The important point for me has been that 'getting photos ripped off' has not been a money losing proposition unless the photographer did nothing, and I do recognize that having to be your own police with respect to people stealing your work is a pain.

The second issue of people giving away their work losing 'everybody' money seems even more perplexing. That the price you can charge for a photo has gone down as more people have entered the market can in fact grow the overall market. On a per transaction basis the market value of a photograph may be lower, but those lower prices cause more people to buy photographs, thus increasing the total economic value. To the extent that photographers are good at educating consumers of photographs that licenses are involved and they should seek out a license that is good for everyone.

I don't see this as a 'tragedy of the commons' rather as a an increase in efficiency of the market to match up good photographs with consumers of same. To the extent that it causes people to 'go out of business' and thus reduce the supply is the counter to an infinite supply of free photos.