High executive pay reveals market failure, says Capital Economics' Roger Bootle Roger Bootle, managing director of Capital Economics, said that a key failing of financial markets is that they push up the pay of those who work in them "out of all proportion" to the value of their work to society. Giving the annual Keith Joseph memorial lecture to Centre for Policy Studies on Wednesday night, the economist argued that the support from a large part of the population for the 50pc tax rate for high earners is a prime example of the costs of not ensuring that markets are working well, and that common sense plays a part in remuneration. The high tax rate is viewed as a way of penalising "undeserving plutocrats" in the City, was his belief. Mr Bootle argued that at the centre of what went wrong in the financial crisis was the relationship between the boards of banks and their institutional investors. The relationship encouraged short-termism as fund managers at these institutions were themselves judged on the near-term performance of the bank shares they held, meaning that they encourage banks to act in similarly short-sighted ways. Mr Bootle defines himself a supporter of markets and lower taxation levels. However, he said: "If supporters of markets fail to acknowledge their limitations and fail to address the areas of market failure, then they will undermine the case for markets overall and risk losing the wider battle against the champions of egalitarianism and state bureaucracy."