Ignoring the legal or ethical concerns. Let’s say we live in a world where the cost of copying code is so close to zero that it’s indistinguishable from a world without copyright.

Anything you put out can and will be used by whatever giant company wants to use it with no attribution whatsoever.

Doesn’t that massively reduce the incentive to release the source of anything ever?

No, because (most) people don't work on OSS for vanity, they do it to help other people, whether it's individuals or groups of individuals, ie corporations.

It's the same question as, if an AI can generate "art", or photographers can capture a scene better than any (realistic) painter, then will people still create art? Obviously yes, and we see it of course after Stable Diffusion was released three years ago, people are still creating.

Yes, and it reduces the incentives to release binaries too. Such a world will be populated by almost entirely SaaS, which can still compete on freedom.

Most commercial software that I've used has the model of a legal moat around a pretty crappy database schema.

The non IP protection has largely been in the effort involved in replicating an application's behavior and that effort is dropping precipitously.