Jesse is attending a camp focused on people trying to correct their lives after heavy use of drugs or alcohol. Fed up, he questions if the group leader had every really hurt someone. The group leader shares his experience of killing his daughter after getting drunk. He lived in a state with an ABC (Alcoholic Beverage Control) store that closed at 5 PM. Some states regulate the sale of alcohol in attempts to limit its consumption, but this can have unintended consequences. Because alcohol is not readily available, some consumers purchase more than they might need. The group leader admits to doing so, drinking too much, and then killing his daughter.
The scene brings forward a discussion between Jesse and Walter. Their dialogue is centered on how their competitors choose to protect their turf and the shooting of their partner Combo, for which Jesse seeks revenge. The scenes within are particularly useful for discussing the importance of property rights delivered by a functioning legal system and the consequences brought about by the impossibility of enforcement, for instance, in the black markets for drugs. For example, when Combo sells “blue” methamphetamine in the competitors’ turf he ends up being killed by an 11- year old boy. The rival gang seizes and sells the “blue” methamphetamine, distributed by Combo and cooked by Walter and Jesse, as their own. Outside of black markets, courts or specialized branches of the police would have handled such disputes. However, when the rule of law and property rights are absent, vaguely defined, or not enforceable, agents resort to other means of enforcement such as violence, which breeds more violence – Jesse is obviously seeking revenge for Combo’s death.
The clip is also useful for illustrating the socio-economic costs and the unintended consequences of illegal drugs and the black markets that form in response. The loss of life and the use of children, often from poor neighborhoods and low-income families, as labor are obvious. A discussion about social mobility and human capital development may also originate within these scenes. In broad terms, children who end up dealing drugs and protecting turfs fail to accumulate the much-needed human capital, which should allow them to fare better than their parents. The scenes within may also be used to discuss how failure to accumulate human capital or make meaningful investments in tomorrow’s labor force diminishes a jurisdiction’s ability to produce goods and services, or, in other words, shifts that jurisdiction’s production possibility frontier inward.
This description comes from Duncan, Muchiri, and Paraschiv (Forthcoming)
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.
Skyler decides to force Ted, her previous employer, to pay his outstanding debt to the IRS. Huell and Patrick visit Ted and strong arm him into writing a check for those back taxes. After signing the check and seeming to cooperate, he decides to make a run for it instead. He takes off running, slips on his rug, and slams head first into his cabinet breaking his neck.
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.
The Economics of Breaking Bad 