First of all, a Hall effect sensor registers magnetic fields, and is the sensor of choice for controllers, these days.
They can be bought really cheap online, and just need a magnet on the axis they are supposed to sense.
They are contactless, so they don’t wear out, and they are a lot more precise than a potentiometer.
I made my own angular sensors out of Allegro 1302 Hall sensors, a diametrically polarized hollow magnet and a bearing.
There are other designs, such as using a Bic pen and two magnets, like here
http://www.simpits.org/geneb/?p=299
I then used a joystick interface board, from Leo Bodnar. The Allegro 1302 is a direct replacement for a potentiometer, so if you have an old joystick to donate the electronics, you could just solder the Hall sensor to that board. If not, then this is a useful interface board BU0836A 12-Bit Joystick Controller [BU0836A] - 27.50GBP : Leo Bodnar, Simulator Electronics
If you want to try this idea, I can send you a magnet and a Hall sensor. I bought a bunch… 