This paper considers the potential of Public-Choice theory to serve as a means to analyse tourism policy. It introduces the central issues for understanding the study of policy and economic decision-making, bringing them together as a single coherent explanation of the role of government within the contemporary market system. In the context of tourism analysis, the focus is on the forces that explain why governments make particular types of decisions for the industry and the effect these have on the community's collective well-being. Policy can impact on a society's culture, its social order, its administration or its use of law, or any combination of these; but, largely it is about the economic welfare of the community. Much of the public decision-making system concerns who gets what, who should benefit and who should pay. The paper reviews the notion of government intervention to establish an 'interpretation' of economic policy-making in Western democracies, such as Australia, Britain or New Zealand. It argues that most policy issues, including tourism issues, derive from some form of failure in the market-place, where the tourism industry is but one component interconnected with many others. The paper expands the public-choice approach further by applying it to segmented markets, and the tourism industry itself, and provides an issue-based model that allows the tourism policy-making process to be explored, exposed and predicted.