Health economics is a relatively new discipline, though its antecedents can be traced back to William Petty FRS (1623-1687). In high-income countries, the academic discipline and scientific literature have grown rapidly since the 1960s. In low- and middle-income countries, the growth of health economics has been strongly influenced by trends in health policy, especially among the international and bilateral agencies involved in supporting health sector development. Valuable and influential research has been done in areas such as cost-benefit and cost-effectiveness analysis, financing of healthcare, healthcare provision, and health systems analysis, but there has been insufficient questioning of the relevance of theories and policy recommendations in the rich world literature to the circumstances of poorer countries. Characteristics such as a country's economic structure, strength of political and social institutions, management capacity, and dependence on external agencies, mean that theories and models cannot necessarily be transferred between settings. Recent innovations in the health economics literature on low- and middle-income countries indicate how health economics can be shaped to provide more relevant advice for policy. For this to be taken further, it is critical that such countries develop stronger capacity for health economics within their universities and research institutes, with greater local commitment of funding.