On Sat, May 9, 2015 at 2:06 PM, Pieter Wuille <pieter.wuille@gmail.com> wrote:

It's a very complex trade-off, which is hard to optimize for all use cases. Using more UTXOs requires larger transactions, and thus more fees in general.

Unless the miner determines that the reduction in UTXO storage requirements is worth the lower fee. There's no protocol level enforcement of a fee as far as I understand it. It's enforced by the miners and their willingness to include a transaction in a block.

In addition, it results in more linkage between coins/addresses used, so lower privacy. 

Not if you only select all the UTXOs from a single address. A wallet that is geared more towards privacy minded individuals may want to reduce the amount of address linkage, but a wallet geared towards the general masses probably won't have to worry so much about that. 

The only way you can guarantee an economical reason to keep the UTXO set small is by actually having a consensus rule that punishes increasing its size.

There's an economical reason right now to keeping the UTXO set small. The smaller it is, the easier it is for the individual to run a full node. The easier it is to run a full node, the faster Bitcoin will spread to the masses. The faster it spreads to the masses, the more valuable it becomes.