Incentivizing Thrift

A Summary of the article incentivizing thrift by Ronald Wilcox:


The article incentivizing thrift by Ronald Wilcox highlights how savings can be encouraged in the economy, he states that consumers in the US have insufficient savings which may result into problems in the future, when there is higher savings then the individuals will be better off and at the same time the economy. The following is a discussion of some of the economic concepts in the article.

Economic concepts:


The article discusses the problem of savings in the US economy, consumers are consuming more and saving less and this may result into problems in the future. A consumer will consume a portion of his or her disposable income and save the rest, an increase in savings will definitely result into an increase in capital stock and at the same time investment is expected to increase resulting into economic growth. Employed individuals in small business should also be encouraged to save by implementing low cost savings retirement plans.

Incentivizing Thrift

Government intervention:

The article highlights that the government has a role to play in the economy, according to the article the government taxation and policy measures should be changed in order to encourage savings, Wilcox states that the government should replace income tax with a consumption tax, this means that individuals will consume less and save more for future. The only problem with this proposition is that individuals may be taxed twice whereby they are taxed currently as they earn and after the taxation system is changed they will be taxed as they consume.


The article also states that another solution to the problem of saving in the economy is education. One of the reasons why people save less is lack of knowledge regarding economic concepts. This should be undertaken by introduction of finance literacy into the school curriculum.


Incentivizing Thrift

From the above discussion of the article it is evident that the government has a role to play in encouraging saving in the economy, the government can replace income taxes with consumption taxes, introduction of financial literacy into the curriculum and the introduction of low cost retirement saving plans.


Phillip Hardwick (2002) Introduction to Modern Economics. McGraw Hill Press: New York.

Ronald Wilcox (2008) incentivizing thrift