It doesn't actually work that way - not in practice, at any rate. That's economics theory over-applied.

Let's suppose child porn didn't exist - a hypothetical situation, but also an admitted impossibility. If child porn didn't exist, why would anyone know to make it? How is this "demand" being demonstrated? If some guy says "I want naked pictures" you are not necessarily going to oblige him unless your intent is to do so anyway, correct?

The whole "you create demand for the creator's work" argument is a bit fallacious, I think.

Now, distribution, on the other hand... yeah, that should carry heavy penalties. And the creators should be publicly executed.