Everybody’s got a story about what causes economic growth. Unsurprisingly, most credit the teller’s ideological mates with all the economic successes of the past half-century or so, while placing the blame for less-sunny moments squarely on the shoulders of their opponents.

Republicans claim they can jump-start economic growth just like Ronald Reagan by lowering taxes (people work harder if they get to keep more of their money). Democrats claim, with equal fervor, that they can jump-start economic growth just like Bill Clinton by raising taxes, thereby closing the budget deficit (so the government won’t borrow the funds that businesses need).

In fact, there’s little evidence for either proposition. At our relatively low rates of federal income tax, the relatively small changes usually proposed seem to make little difference. But the debate is no less vehement for the paucity of proof.

Free trade, economic stimulus, public vs. private pensions – our public-policy journals daily prove the adage that if all the economists in the world were laid out end to end, they wouldn’t reach a conclusion. That’s a good thing: In the 1950s and 1960s, everyone agreed the economy should be managed by Keynesian technocrats constantly fine-tuning things by twisting interest-rate knobs or pushing government-spending buttons. When economic opinion is so uniform, the usual result is a claque of policy wonks watching idly as their ideas drive the economy over a cliff – remember stagflation?

In one way, however, we’re still beholden to a dominant paradigm. Our policy debates all fixate on macroeconomic issues such as interest rates, budget deficits, and taxes – the tools of those Keynesian lever-pullers. In his new book, “The Competition Solution: The Bipartisan Secret Behind American Prosperity” (American Enterprise Institute Press, 227 pages, $25), Paul London argues this is all wrong.

We didn’t emerge from the doldrums of the 1970s into the recent golden era because our politicians found the magic macroeconomic model to make the economy grow faster. On the contrary, the economy grew faster because at the microeconomic level – the level at which companies and individuals compete to sell their goods and services to one another – politicians began leaving it alone.

If you are barely 30, as I am, you may not realize just how regulated many industries used to be. If you wanted to start a new airline, for instance, you had to go before the Civil Aeronautics Board to prove not merely that your planes were safe, but also that there was some especially pressing need for your services. If you wanted to haul oranges from Florida to New York in your truck, there was a federal agency to stop you from doing so unless you could convince its bureaucrats your services were required on that route.

From casket sales to telephone calls, American goods and services came to consumers thickly wrapped in red tape. Not every industry was as heavily regulated as transportation; nonetheless, many were nearly as cozy and bloated as their regulated counterparts. In insular American markets, a few companies often dominated, tacitly colluding to eliminate that “destructive competition.”

This sclerosis was the legacy of early 20th-century technocrats who thought they could tame the unfettered market, keeping management from getting too rich or setting off cycles of “destructive competition” that slashed prices, drove down wages, and put firms out of business. They failed to foresee the antithesis of “destructive competition”: the fat, sloppy firms of the early 1970s that produced lackluster products at a high price. Without competition, why bother to do more?

The unlikely savior of the American consumer was Jimmy Carter, who presided over massive deregulation in key industries like airlines. The protective swaddling around major markets was ripped away, forcing firms and workers to compete with each other for business.

The results were slow in coming (we’re still seeing the fallout from airline deregulation in the recurrent travails of the major carriers) but inevitable once the process was in motion: a more efficient economy getting more goods and services to more people at a lower price. The government’s waning support for trade barriers forced industries to fight imports by producing higher quality products at lower cost.

In slightly under 200 pages of workman-like prose, Mr. London convincingly argues that our policy disputes about the macroeconomy overlook the real source of our current prosperity. This is an important accomplishment. Though it is always more fun to argue about taxes than trucking regulation, such a preoccupation with macroeconomics lessens the vital drive toward freer trade and more competitive industry.

Alas, Mr. London has the weakness of many policy writers: He attributes all economic good to his One Big Idea. This leads to some suspect pronouncements. While he rightly demolishes ideological policy claims about things like tax policy, he dismisses sound theoretical innovations such as the renewed emphasis on controlling inflation, which started under Carter. Macroeconomic policy may have limited power, but it’s lunatic to think that double-digit inflation could have been good for growth.

Moreover, Mr. London seems to be a sucker for anything that claims to increase competition, calling for aggressive anti-trust policies even though their competitive outcomes are uncertain: Are the Microsoft prosecutions making Microsoft compete more,or helping Sun Microsystems and American Online compete less?

Still, if you are going to pick a cure-all, Mr. London’s is a good choice. Out-of-control tax rates or inflation can certainly drag down an economy. But unless individuals and firms constantly strive to produce more, better, and faster, the economy will not grow – no matter how many levers the technocrats pull.

Ms. McArdle last wrote for these pages on the economic crisis in Argentina.