Latent trait modelling is a recent psychometric technique with great potential for the construction and refinement of psychiatric instruments. It provides a greater insight into the nature of measurement in psychiatry and the statistical machinery for improving it. This expository paper starts with a non-technical outline of the latent trait model, gives a detailed analysis of the 12-item General Health Questionnaire (GHQ) and examines points raised by the empirical analysis through computer stimulation. It is shown that the latent trait model can give a good representation of empirical data and uncover new aspects of a familiar instrument. It provides a precise methodology for evaluating the functioning of a questionnaire and for developing better short instruments. It highlights the need, and provides the means, to tailor instruments for different tasks, such as (a) screening, and (b) measuring over the whole range of the population. We examine scoring in the light of the model, and show that simple scoring is often adequate. While points for further methodological development are noted, it is argued that the method is already sufficiently developed for general application.