Water Contamination

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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.

See more: command and control, government regulation, market failures, negative externalities, private benefits, social costs

Externalities & Types of Goods · Saul · Walter

Don’t Leave

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Walter is about to leave, but Saul takes some time to advise against it. While it may seem like he’s doing what’s best for his family, Saul explains how law enforcement will come after Skyler and ruin Walter’s family. Walter is making a private decision about what to do and what he believes is best, but he may be ignoring all of the costs he imposes on other people by running. Saul suggests that if he truly cares about his family then he’ll turn himself in.

See more: externalities, interdependent utility functions, negative externalities, private benefits, private costs, social costs

Externalities & Types of Goods · Hank

Saying Goodbye

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Walter takes a trip back to his old Albuquerque home to see what’s left of it. After Skyler and the kids leave, no one wants the house and so it has succumbed to vandalism. Normally, property rights would incentivize people to take care of their property and protect it against vandalism, but no one wants an old meth kingpin’s home.

See more: externalities, negative externalities, property rights

Foundations · Hank · Skyler · Walter · Walter Jr.

Correlation vs. Causation

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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.

See more: causation, correlation, negative externalities, signaling, statistical discrimination, unintended consequences