It's great that it went well, but it's a stretch to say it proves anything. It was the first (mainstream) attempt at this model, and so many people (may have) paid to ensure that it worked.
They told their customers "Pay what you want!" and got a median of $3 and an average of $4 ~ $5, both of which are well under the prices of the cheapest plans of the vast majority of SAAS products and insulting next to the prices their competitors charge.
It proves that it is possible for a "pay-what-you-want" pricing scheme to generate more money for producers than the traditional model.
I am sure more money was spent in total on their previous album. What Radiohead did in this case was shrink the total market for their album yet capture more revenue for themselves. From an economist point of view Radiohead caused the GDP to shrink - less $ of goods were created - yet Radiohead got paid more and more people were able to listen to music they liked. So the world is better off yet the GDP is smaller.
Coupons and rebates are another example of "pay-what-you-want-pricing." The manufacturer sets a high list price then offers a discount to people motivated enough to jump through the hoops needed to get the discount. You decide if it matters enough to you.
My point is that there is room for innovation in economics - trotting out a 200 year old theory about grazing animals may not apply in a world where most of the things people want can be provider for almost zero cost.
