In January, Miss Snark wrote a blog entry about agents who write books in the genre they represent. She stated, "Of COURSE there's a conflict of interest... I think it's icky."
Yesterday Deidre Knight, whose first paranormal romance will be out in April, wrote an answering blog entry. She says, "Miss Snark argues that an agent writing is directly in competition with her clients for limited slots; this viewpoint is predicated on a faulty analysis of how the publishing process works. For that matter, also on how the agenting business works...The publishing terrain I work in every day is far more fluid, with opportunities ebbing and flowing as lists change, authors move or change genres, markets transform, and so on. It’s a constantly shifting climate, not an inflexible place where a set number of slots get swallowed up."
It's an interesting question. The Knight Agency continues to sell paranormal romances at a scary clip, so I'm inclined to think whether an agent writes or not isn't anywhere near as important as whether or not they're a well-regarded agency with good contacts. But some authors might not be comfortable working with an agent they see as a competitor, and that's okay too. Me, I just want an agent who can sell my books:-).