Standard classroom economic theory is based on the assumption that people are "Rational Utility Maximizers." When people make choices about what to purchase they generally pay more for things that are more in their best interest. That is, things that bring them greater value, whether pleasure, knowledge they are seeking, etc. When prices are allowed to move freely people make their purchasing decisions based on the value a product brings. The corresponding demand and supply leads to a price that is regarded as Pareto Optimal. As I understand this is leading to what is regarded as an "efficient" distribution of goods. You've essentially maximized the overall utility. Artificial distortions of the price can improve the utility condition for some, but it does so at the expense of others, and the overall utility is reduced. For the economist this is bad so of course free market pricing is preferred.
Rational Utility Maximization seems like an OK first order approximation. I'm not going to buy and eat a shit sandwich no matter how much marketing comes with it. But do you think marketing executives agree with these assumptions when it comes to advertising? As I've mentioned a while back I'm been trying to learn Chinese, and in the process I've looked at various teaching methodologies. Here's one thing that pops out for me as I gather opinions. Rosetta Stone is not highly regarded. Here's one person's effort at evaluating the opinion of successful and non-successful language learners. Rosetta Stone is regarded as the worst. Few of the successful learners questioned regard it as helpful. In terms of which is regarded as the worst RS is far and away in the lead, both among successful and non-successful learners. I've spent a lot of time reading websites that discuss self teaching language methodologies. This fits the pattern.
So isn't it strange to notice that not only is RS far and away the best selling language learning product on the market. It's one of the more expensive products available. And according one person's polling efforts the people that have used it and succeeded at language learning think it's the worst product available. What the hell is going on?
Is it possible that the economists are (once again) wrong? RS has the biggest marketing apparatus of any language learning tool. As I understand the software is very flashy and impressive. Does this encourage people to make a rational choice when it comes to selecting a language learning product?
RS is prepared to shell out big bucks for spokespeople. We all remember Michael Phelps in Beijing, right? It was a natural fit for RS. Get Phelps to be a spokesmen. You can go here to watch the commercial. You also get another treat at that link. Phelps on Fox News Business discussing how it's going. So how was it going? Well apparently it was tough for Michael, but at least he's starting to get the masculine and feminine terms down. Like you know how in Spanish some words are masculine, like sombrero (hat), and others are feminine, like silla (chair).
But there's a slight problem. Chinese doesn't assign gender to words. Is RS so bad that it taught Chinese incorrectly?
Probably not of course. I think it's safe to assume that Michael didn't use RS much if at all. This is pretty pathetic, right? At least Jenny Craig uses spokespeople that have used the system and succeeded. But for the marketing executives at RS that's obviously unnecessary. What you need is to just pay a famous person enough to mouth the words "RS will teach you Chinese really fast" and people will go out and buy it. That's not rational utility maximization. Instead it's how the real world works.
So who are we going to believe? RS marketing executives and their $200 million in sales? Or the economists with their fancy equations? Or maybe we should assume that the polling of successful language learners was somehow mistaken. I think the economists are pretty impressed with their own fancy equations, but because reality is not permitted to pop their bubble they are unaware that it's all wrong, and we are likewise expected to accept their assertions on the proper (free market) allocation of goods and services.