By Bonnie Palifka

Monterrey, Mexico

I have come to the conclusion that growing up in cold-war America was a very privileged experience. As an economic historian, I am aware that much of humanity's history, like much of the present, consists of war, conquest, violent exploitation, and general nastiness. Most of this unpleasantness has been a result of economic ambition.

Today, the situation in northern Mexico, where I live and teach, is fed not only by the demand for illegal drugs in the United States and the ease of purchasing powerful weapons just across the border, but also by the masses of desperate, urban poor in Mexico who see no hope and no legitimate economic opportunity. At the same time, they observe grotesque wealth among their country's elite and in the upper echelons of the criminal organizations.

An informal economy absorbs more than one-fourth of Mexico's labor force, but the number of unoccupied youths—who neither work nor study—is growing. In microeconomics, we teach our students two criteria for fairness: results-based (it's not fair if the results are unfair) and rules-based (it's not fair if the rules are unfair). Either way, the current outcome is not fair in Mexico.

Society here has failed to provide equal opportunities in education and employment, and basic institutions, such as the legal system, are fundamentally flawed in either design or implementation. Organized criminals have taken advantage of those flaws, corrupting the judicial system and using their resources to kidnap, steal, and extort indiscriminately.

Two years ago, two graduate students were killed in the crossfire between organized criminals and soldiers outside the campus gates of my university. The University of Texas at Austin recalled study-abroad students here and stopped approving new requests for academic exchange in Monterrey. Other colleges quickly followed suit. Now we have virtually no students from the United States, although we continue to receive students from Europe and Asia. Many of the Mexican students had already begun transferring elsewhere (both within Mexico and to the United States) because, as the children of businessmen, they were potential kidnapping targets.

By now, the shock of those graduate-student deaths has worn off, but the effects of organized crime in Mexico have worked their way into the courses I teach. In "Economic History," for example, we read in the newspaper that distributors no longer go to certain parts of the city considered too dangerous. Students see firsthand how insecurity has created a huge exodus from the criminal-controlled countryside to the city, where homebuyers opt for gated communities despite the higher prices.

In microeconomics, the drug cartels offer an example of "economies of scope," which occur when a company uses its resources to produce more than one product. The cartels' resources are guns and thugs. When the U.S. and Mexican governments cracked down on drug trafficking, the criminals diversified into other activities, like kidnapping and extortion.

A real-world example of "economies of scale" is that it costs less per kilo to take one ton of marijuana across the border in a truck than to take 10 kilos at a time stashed in the doors of an ordinary car. An example of "sunk costs": When you are deciding whether to move to the United States to give your family a safer life, the money you have invested in your house in Mexico doesn't matter.

And then there are the daily reminders of what lies beyond the classroom door. We can't ask our students to turn off their phones because their parents need to be able to locate them at all times, in case they get an extortionary phone call. As one student put it, "When I was a little girl, my siblings and I would be gone all day, at friends' houses, and our parents wouldn't know where we were, but they didn't worry. Now I have to call every hour."

One of my students missed a week of class this semester when his mother was kidnapped, and missed another when she was recovered and the entire family left the country to decompress. Obviously, that kind of stress takes a toll on grades and on our ability to teach effectively.

Yet there are many things to love about Monterrey: majestic mountains, friendly people, a strong work ethic, fresh-squeezed orange juice, and street vendors selling hot corn and sweet potatoes. It is the perfect blend of Mexico and the United States. Furthermore, working at one of Latin America's top universities has afforded me opportunities I probably would not have enjoyed elsewhere.

Ironically, one of the reasons we moved here was to escape the social ills of the United States: drugs and guns. I wanted to raise my children in a drug-free environment in which we would not have to worry about random crazy people going on shooting sprees. I am haunted by the words of Master Oogway of Kung Fu Panda: "One often meets his destiny on the road he takes to avoid it."

So what are we to do?

I remind myself daily that the odds of being killed in a car accident are greater than the probability of being caught in crossfire. If we consider only the innocent victims in the Mexican drug war, the homicide rate is lower here than in several American cities. Even including the crime-related victims, two cities in the United States still have higher homicide rates. (Interestingly, when I taught at Yale last summer, a number of well-meaning friends and family warned me that New Haven is a very dangerous place.)

Still, we take measures. Like many others here, I stay in after dark, keep a close eye on my children when we leave the house, keep a low profile on Facebook (used by some to identify potential kidnapping or extortion victims), do not engage in conspicuous consumption, turn on the air-conditioner at night to block out the sound of gunfire, and try to help others when I can. Attendance is down at evening movies and dance clubs; demand is up for homes in gated communities. We avoid, as much as possible, military convoys or places where a helicopter is circling overhead. Some professionals have gone so far as to buy "anti-kidnapping" (old) vehicles.

Mexico is a curious place to live, and to teach. Stray dogs walk on the sidewalks, while pedestrians walk in the street. The dogs, it seems, have learned that the sidewalk is safer; the people opt for the road because, well, there's dog poop on the sidewalks. That same dynamic is being played out on a societal level: The narcos have taken over the public spaces that used to be safe, while the rest of us take measures to avoid their crap.

Bonnie Palifka is an assistant professor of economics at the Tecnológico de Monterrey. The opinions expressed here are personal and do not represent the Tec de Monterrey or the Itesm (Instituto Tecnológico y de Estudios Superiores de Monterrey) system.