Why is DC housing booming? Because government growth is bringing in government contractors and lobbyists, this piece by Megan McArdle suggests. I often point out the vicious circle: more government means more lobbyists means more government means more lobbyists. McArdle makes an alternate point: more lobbyists just always means more lobbyists

Some highlights from McArdle’s piece on DC’s housing bubble at the Daily Beast:

So where is all this money coming from?

Contractors and lobbyists, says my mother’s real estate agent.  He’s seeing an enormous number of young two-income couples who are making $200,000-400,000 a year.  Usually there’s a law degree involved, but sometimes it’s a PhD or an MBA….

the “lobbying” version of theory two also has a fair amount of empirical support.  And it suggests that if government spending continues apace, the boom will also keep roaring along.

A more interesting question is what happens when the spending stops.  If the DC boom is mostly driven by contractors, then spending cuts will be bad news for home prices. But if it’s mostly driven by lobbyists, as the preponderance of law degrees suggests, then we have a fresh round of questions. You might think it’s obvious that no money means no lobbying.  But with the peculiar logic of lobbying, that ain’t necessarily so.

If the money had never flowed in the first place, we’d probably have fewer lobbyists.  But these things are what social scientists call “path dependent”, which is a fancy way of saying that stopping something is not the same as never having started it.  Anyone who has been through a bad breakup can attest to this truth.

After all, the lobbyists are here now.  They’ve bought houses and established a social circle.  They have a lifestyle they enjoy. What do they do if a Romney or Obama administration starts closing the taps?  Just sell the houses at a loss and look into social work?

Rather than selling the house, there’s strong reason to believe that they start selling their services even harder–an argument you can read at greater length in Government’s End, Jonathan Rauch’s brilliant book on lobbying.  There are a lot of interest groups currently dipping into the river of money flowing out of Washington.  If the river starts drying up, those groups will need lobbyists more than ever, to defend their position on the riverbank.  Every trade association, consumer group, and union in America will descend on Washington to try to deflect the spending cuts and taxes increases onto someone–anyone!–else.

The upshot is that it seems as likely as not that DC home prices will stay high for a while, no matter what happens to government spending.  That’s great news for my mother and me.  But it’s terrible news for America.