Skyler starts doing the books for Walter’s drug income and is ready to learn how the money gets laundered. She doesn’t think Saul’s setup is legitimate enough to get past the IRS so she wants to talk to him directly. It turns out that Saul’s ideas seem ludicrous to her. One unintended consequence of policies that outlaw the production/distribution/consumption of drugs is the creation of money-laundering operations such as “Ice Station Zebra Associates”. Walter uses this “company” to launder the money he earns from manufacturing methamphetamine.
Walter and Skyler are in the market for a new house. Walter is attempting to maximize his utility by proposing to Skyler a larger house instead. In other words, Walter is trying to move onto a higher indifference curve. However, their limited budget represents a constraint to Walter’s utility maximization problem.
Skyler gets Bogdan to sell his car wash under an elaborate ruse where it appears he is contaminating the local groundwater. While the company isn’t actually polluting the groundwater, companies that contaminate groundwater are imposing external costs on society and are not accurately accounting for that cost in their pricing. While the optimal amount of groundwater pollution probably isn’t zero, with negative externalities, firms are overproducing. Governments often take a command-and-control approach to some forms of regulation and insist that companies pay steep fines for violations.
Walter brings in the first batch of money for Skyler to launder, but she’s shocked by the amount coming in. Walter brings in $274,000 for her to get through the system, but she quickly realizes he’s earning millions of dollars each year, which is far more than what she can reasonable hide in a car wash. Both are frustrated because they have specialized in their own part of the operation and can’t control the other portions of the setup
This clip represents a wonderful account of all the moving parts of Walter’s methamphetamine enterprise. Walter and Jesse cook, Lydia arranges and oversees the international shipments of methamphetamine, which are disguised as shipments of various chemicals between the subsidiaries of the multinational enterprise she works for, Todd coordinates the transportation operations, and Skyler is in charge of accounting and money laundering. Here, the division of labor and the comparative-advantage based specialization is what makes their enterprise successful. If one or two individuals tried to run the same operation (like when it was just Jesse and Walter), they would not be able to produce as efficiently. The downward sloping portion of the average total cost curve is the area where the benefits of specialization outweigh diminishing returns from adding additional workers.
Family meals are a great chance to see all the different complements and substitutes in a market. While milk and cereal are often consumed together (complements) there are other options people can decide upon to fulfill their breakfast need. Walter Jr opts for eggs and bacon (substitutes). The decision process involves weighing costs and benefits of alternatives.
Walt weighs the costs and benefits of his decision to start producing meth. The benefits are clear, the money will cover college tuition, tutors, mortgage payments, and all future expenses. The costs have been larger than Walter could imagine, but he believes all the benefits have outweighed the costs of his decisions.
Is it worth Skyler’s trouble to turn Walt in for making meth? She discusses this decision with her lawyer, but can’t seem to convince herself to go through the process. In this scene, Skyler is audibly weighing the costs and benefits of her decision. The lawyer seems to think that the benefits of turning her husband in outweigh the costs, but Skyler decides otherwise
Skyler speaks to Ted Beneke (her boss) about some underreported income, which she found while analyzing the company’s accounting records. Initially, Ted labels this as an accounting error, but soon admits to underreporting income in an attempt to avoid paying more in income taxes. From this conversation, it’s clear that Ted purposefully engages in this illegal activity by taking into account the costs and benefits of his decisions. The scene is also useful for discussing the decline in tax receipts during a recession as well as its potential causes. Skyler also has to weigh the costs and benefits of reporting her boss (and friend) to the IRS.
There’s an arrest on school property, and Hank shares why he believes the janitor was responsible for the recent thefts at the school. The theft corresponds to popular equipment used to make meth, and the janitor (Mr. Archilleya) had a past record for possession of marijuana, had access to the school, and during a search of his vehicle, had possession of marijuana. Skyler is confused how Hugo could even get a job at a school with his record, but Walt notes Hugo doesn’t seem like a drug dealer. This is a classic example of mixing correlation with causation. Just because Hugo has markers that could potentially make him a criminal, it doesn’t mean that it would cause him to be willing to steal from his employer. Society often mixes correlation with causation, which results in some unfortunate outcomes.
Now that Skyler knows about Walter’s cancer, they are on the lookout for ways to finance his healthcare. Skyler reaches out to one of the best oncologists in the country, but the first consultation alone is priced at about $5,000. This is not something a typical family in the United States can afford. However, the two could use their credit card or borrow the money form Hank, Skyler’s brother in law. Nevertheless, the reason this particular doctor is so expensive is because he is not part of their Health Maintenance Organization (HMO), which works to lower copay and further costs for those covered by insurance. In this regard, a health care system akin to the one in the United States can be a bit confusing and hard to navigate especially for the poor and less educated. This clip represents an interesting way to start the discussion of how individuals pay for medical care.