In economic theory, it is relatively straightforward to analyse the impact of government controls over economic activity. Whether the control is over feed-grain prices in Egypt, the quantities of imports of individual items in India, price controls on ‘old’ oil, or the ‘voluntary’ reduction in the number of automobiles exported from Japan to the United States, several conclusions follow straightforwardly. First and foremost, those controls (and most others) at best achieve their objectives in a more costly manner than would alternative mechanisms. Second, the presumed beneficiaries of controls are often quite different from those (if any) actually benefiting. Third, the costs of controls seem to be largely ignored or misunderstood in political decision-making, at least in the first instance.

Despite these well-established results, controls seem to persist. A major challenge confronting those concerned with their costs is to attempt to understand the reasons why the political process often generates and perpetuates high-cost solutions to stated objectives. To establish an understanding of the political economy of controls would appear to be a formidable, but important, challenge, if means are to be sought to lower the costs of attaining political objectives.

The purpose of this chapter is to attempt to further our understanding of the political economy of controls. Section i provides a survey of existing models of regulation. The remainder of the chapter is then devoted to an examination of how well those models perform in light of the history of one particular set of controls – the American sugar programme.