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 has found a new friend in Gale and is surprised that a well-trained chemist decided to become a drug producer. The two of them aren’t the most obvious criminals. Gale believes his importance in the process is to help people get a clean product. Addicts will buy drugs without knowing what’s in them (asymmetric information), but at least Gale’s product is pure.
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.
After watching a gruesome beating, Jesse and Walter are officially scared of their new distributor, Tuco. Walter starts to calculate just how much money he needs to earn selling meth in order to take care of his family. Becker’s theory on the rational criminal suggests that criminals take the time to calculate the costs and benefits before committing their crimes. Walter is even careful to consider future inflation changes as he determines the appropriate amount to “invest.”