This paper considers how health economists can assist nurse managers, using the concepts and tools of economic evaluation. We aim to clarify these and also explode some of the myths about economic evaluation and its role in health care decision-making. Economic evaluation techniques compare alternative courses of action in terms of their costs and consequences. There are four principal methods; cost-minimization, cost-effectiveness, cost-utility and cost–benefit analysis, all of which synthesize costs and outcomes, at different levels of outcome. Economic evaluation is an intrinsic part of national decision-making about the efficient provision of effective treatments and services, and increasingly, organizational matters. In the UK, such technology evaluation is disseminated in guidelines from the National Institute for Clinical Effectiveness (NICE), having a top–down impact on the nurse manager. But economic evaluation is increasingly relevant to the nurse manager at local level, through newer techniques such as Programme Budgeting Marginal Analysis (PBMA), which facilitates explicit, transparent decisions, from the bottom–up. Nurse managers need to weigh up competing demands on resources and decide in ways which maximize health gain. Economic evaluation can help here because it presents evidence to challenge or support existing allocations, and provides a systematic framework to analyse health care decisions. In the current context of competition for scarce resources, we suggest that nurse managers need to embrace these techniques, or be marginalized from the resource allocation process.