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Indiana University Bloomington

BEPP

Beyond Supply and Demand

Mike Baye

Director, FTC's Bureau of Economics; Bert Elwert Professor of Business Economics and Public Policy

Bloomington, Indiana
Mike Baye

“Economics is my career, but it's also my hobby. It's a fascinating way to look at the world. Everything is about supply and demand and incentives.”

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As director of the Bureau of Economics at the Federal Trade Commission (FTC), Professor Mike Baye advised the commission on economic policies that affect everyone.

But don't call him a politician. Baye's top priority—transferring his knowledge of economics and public policy to students so that they become better economists and voters—didn't change. With his appointment ending in December, Baye's return to Kelley full-time—includes even more real-world examples to share with his students.

Since his July 2007 appointment to the FTC, Baye adjusted to Washington's fast-paced environment. He addressed every type of economic issue that arose, from antitrust to consumer protection. “I acted on hundreds of items that came up every day,” he says. “As an academic, I might spend two years thinking about a problem and working on it. The sheer number of issues that came up at the FTC surprised me.”

Baye was also impressed by his co-workers at the bureau. He worked with about 70 highly educated economists who specialize in segments of the U.S. economy, such as the pharmaceutical and oil industries. “We don't just speculate,” he says. “There are specialists [at the FTC] who really understand how these and other markets work."

Baye credits the "team approach" and collaborative culture at Kelley as being a real asset that helped prepare him for the role of Chief Economist. He says, "You're interacting with people from a lot of different disciplines. You have to be tolerant of different views and skills." He acknowledges that Kelley's approach is ideal preparation for business students, "Part of being successful in business is learning how to interact with a diverse group of people."

The Bureau of Economics is part of a system of checks and balances at the FTC that also includes the Bureau of Competition and the Bureau of Consumer Protection. All three make recommendations to the commission, the ultimate decision-maker. For Baye, this system is ideal. “Sound decisions require good information,” he says. “The checks and balances ensure that all voices are heard, and that the commission has the best possible information to guide its decisions."

Baye worked to elevate the role of research in economic decision-making. “Decisions should be based on the best state-of-the-art research available,” says Baye, who created an Office for Research and Development and Operations and the Office of Applied Research and Outreach. In addition to such initiatives, Baye managed the FTC's ongoing economic research projects.

Baye also continues his own research on game theory and pricing in online markets. “I've always been interested in firms' pricing decisions, in particular the interplay between the pricing decisions of firms and the search behavior of consumers—the incentives they have to seek out the best deals,” he says. To gather and present this research, he teamed up with fellow economists John Morgan and Patrick Scholten to create Nash-equilibrium.com, which tracks the competitiveness of the Internet.

Throughout his term at the FTC, Baye stayed connected to Kelley. He was in his Kelley office every Friday to meet with faculty members and advise doctoral students. He appreciates Kelley's collegial atmosphere, especially the Brown Bag Workshops, where faculty members can share research ideas with colleagues. The best thing about Kelley, in Baye's mind? “There are no university politics to distract me or otherwise limit my productivity,” he says.

Baye is thrilled to be back in Bloomington with his family—for more than just a weekend. He would spend weekends with them before catching a 6 a.m. flight to Washington every Monday. “Economics is my career, but it's also my hobby,” he says. “It's a fascinating way to look at the world. Everything is about supply and demand and incentives.”

In Brief

Park ranger turned economist: “A high school career aptitude test pegged me as a park ranger, because I'd rather be outside than sitting at a desk all day. So when I started at Texas A&M University as an undergrad, I was a biology major. An economics course was required for biology majors, and I did extremely well in that class. It just came to me naturally. The professor told me I'd never get a job with a biology degree, so I switched to economics. My career came down to supply and demand.”

Life in Bloomington: “Living in a small college town probably increases my productivity by about two hours a day. Bloomington is unique in the sense that despite being a small college town, it offers a level of amenities that rival a number of big cities with the number of events at the IU Auditorium and the thousands of musical performances each year.”

In a nutshell: “Kelley's a great business school, a great environment, and a great community. You can't beat Bloomington.”

Published April 8, 2011