Reforming markets in health care: An economic perspective Edited by Peter C Smith Open University Press 297 pages £19.99 paperback £65 hardback

Robust statements from health secretary Alan Milburn and other ministers may have led you to believe that the internal market has been abolished. According to the editor of this book, you would be mistaken.

What we are witnessing is a refinement and updating of the UK health market through a 'more subtle and sensitive regulatory system'. Whether hard-pressed managers reeling from the cascade of guidance notes and circulars flowing from Quarry House will see it in these terms is another matter.

Written by an all-star cast of authors from York University and their close colleagues, this book offers the economist's perspective on some of the main components of the New NHS approach.

Everyone has heard of evidencebased medicine, but did you know that this might be seriously deficient? What we really want is economics-based medicine if scarce healthcare resources are to be allocated on the basis of both clinical and cost effectiveness. This approach is favoured by the National Institute for Clinical Excellence. Unfortunately the development of evidence-based cost-effectiveness guidelines is still a 'fledgling science' and, somewhat surprisingly for health economists, contributors advise NICE to steer away from 'assumption-laden' quality-adjusted life years.

In the rush to move away from short-term contracting - and towards long-term service agreements that are seemingly more consistent with collaborative relationships - the fact that many successful long-term relationships outside the health sector are based on short-term contracting seems to have been overlooked. On the development of reference costs and benchmarking, why is so much effort going into producing hospital cost data when virtually all cost variation is attributable to variations in far more easily observed patient lengths of stay?

Everyone agrees primary care groups are a central feature of the New NHS and that equity requires that they should be funded through a needs-based formula.

But the inability to devise a satisfactory formula at this level of population aggregation, given current data availability, is likely to leave a yawning gap in this agenda.

The brave new world of performance management and national performance frameworks has several similarities to the old style Soviet planning system.

Without adequate safeguards, it can be expected to lead to similar misrepresentations, distortions and downright fiddling of figures on the part of those whose careers depend on meeting central targets.

But the possibility of dramatic failings should not be overemphasised. Explaining the approach of the New NHS, highlighting unresolved problems and offering suggestions for improving performance are the underlying themes running through the various chapters in this informative book. With such a distinguished set of academic contributors, it is no surprise to discover the thorough and well constructed way in which each chapter has been written.

The book is not a quick read and will probably be used more by students and researchers than by those looking for an executive summary of events. But it can be recommended to anyone who seeks a well-rounded and analytical account of the present government's approach to health policy.

Ray Robinson Professor of health policy, LSE Health, London School of Economics.