Economists are sometimes described as heartless and unemotional, and you probably need to be that way to see the economics of this episode.
The plotline is that Wu imports opium from California by (Chinese) courier. He then sells it to Swearengen who is the prime distributor. This week, Wu confronts Swearengen with the news that two white men killed his courier and stole his opium. He expects Swearengen to find the culprits and deal with them (the unspoken idea is that Wu cannot pursue the culprits himself due to prejudice in the old West). Wu clearly desires a blood atonement for the death of his hireling. And, there is never a question about catching the perpetrators, or passing judgement.
So, where is the economics? It is in the question that comes up repeatedly throughout the episode. If two white men committed the murder, how many need to be killed in order to settle the issue? Swearengen inquires with a number of people (whites only), who tell him implicitly that the opportunity cost of a Chinese man is definitely not two white men. In fact, many exhibit their prejudices by saying that the opportunity cost is zero white men! Ultimately, Swearengen settles on a price of one white man for one Chinese man, but this is only because he is afraid that Wu could extract that cost in other ways that might hurt Swearengen more.
See my earlier economics in Deadwood posts at:
Corruption's Prices in Deadwood
Deadwood's Invisible Hand
Derivatives in Deadwood
Collusion and Asymmetric Information in Deadwood
Elasticities in Deadwood
21st Century Economics in Deadwood
P.S. I'm wondering if there isn't a seed being laid in the plot here. How did Wu know two people committed the murder? How did he know they were white? My guess is that he may be trying to face off Swearengen and Tolliver (the other saloon owner) for his own gain. After all, what was clear is that one of Swearengen's employees and one of Tolliver's employees (and Swearengen's too) had the opium.