I think it's possible to sidestep the harm vs suboptimality discussion. It's clear that there is a benefit to the public when works become public domain, and copyright law should balance benefits to creators and consumers (though of course we all fill both roles to some degree). Laws also have to be politically viable, of course.

> Using your logic, the government then ought to force you to donate all your savings and excess possessions to "society" so that harm is reduced.

I would argue that governments do a "soft" version of this with redistributive tax schemes and social programs.