WANT TO know why the economic slowdown will hit Washington so hard? Look no farther than the garage sale nearest you. It lays bare this area's financial psyche.

At one recent neighborhood sale in Northwest, my husband and I saw a wobbly set of salmon-colored bookshelves, priced at $65. Too much, we thought as we walked away.

We strolled by again late in the afternoon and saw the shelves still sitting on the porch, where the residents of the house were enjoying a cocktail and counting their proceeds. We asked if they'd take $20. The owner looked as if he were about to accept; obviously, it was his last chance to sell the piece. "Take it," his daughter urged him. He walked over to see what price he had asked -- and changed his mind. "Thanks, I think I'll hold on to it," he said.

All over town, homeowners, retailers and others are saying the same thing. This area is chock full of people who refuse to believe the most elementary principle of business and economics: If it's not selling, drop the price.

Houses, in my neighborhood and everywhere else in the area, sit on the market for months because their owners consider it a point of pride to walk away with a big "profit" -- even if it costs them thousands of dollars in mortgage payments in the meantime.

A liquidation firm takes over Garfinckel's inventory and begins by selling the stuff at smaller discounts than Garf's itself was offering the week before it filed for bankruptcy.

A rug store around the corner announces it is going out of business, and for weeks displays "Everything Must Go" signs in the window. But every time I check the prices, they're unchanged. As the owners finally paper up the windows, big stacks of carpets still are inside.

Times are soft. If sellers don't reduce their prices, whether for rugs or houses, their product stays on the market. Inventory builds up. The money that would be made even from lower-priced sales -- real estate agents' commissions, sales clerks' salaries, lenders' profits on mort-gages -- doesn't get made. Jobs are lost. And then the crunch really comes.

Even more disturbing, many of the people who are holding the area's economy hostage are the same folks who are making or influencing national economic policy: Capitol Hill aides, lobbyists or even journalists. If they don't know that cheaper prices sell more goods, they must not know how currency shifts affect the trade deficit or why the Fed controls interest rates. To be sure, plenty of businesses around here are engaged in heavy price-cutting. Office-building developers are slashing rents just to get tenants. Some department stores and boutiques put merchandise on sale as soon as it comes in. Commercial homebuilders are selling at a loss just to get rid of their financing costs.

But it's the holdouts, especially in the real estate market, who are threatening to make the coming recession even worse than it might otherwise be. They're the ones who are worsening the pain by attempting to prolong it. By the time recalcitrant homeowners realize that there's only one way to sell their houses -- designer kitchens and walk-in closets won't do it -- the economy will be stuck in first gear and an avalanche of dumped real estate will make it worse.

The other harm Washington's price sticklers are doing is perceptual. Acres of "For Sale" signs aren't conducive to a healthy business climate. Consumers who walk into a car dealership aren't about to pay sticker price when their house has been on the market for eight months. That's something our auto dealers themselves would do well to remember; they aren't much into price-cutting either.

As sellers are getting stupider, buyers are getting smarter. No house on the market is going for its asking price these days, and brokers report that offers on the big-ticket homes, where holdout mania runs highest, come in hundreds of thousands of dollars below list price. Sellers will have to back down to get our housing inventory moving again; buyers aren't suddenly going to decide not to haggle.

Home-sellers know this. In fact, the same army of Type A personalities trying to unload their houses for too much money are the biggest bargain hunters in the move-up market.

Why such housing hubris? I think it's because no one in Washington can bear to fail. The same instinct that drives 70-hour work weeks, slash-and-burn political advertising and waiting lists for private kindergarten sees acceptance of a lower price as humiliation rather than common sense. Pride goeth before the recession.

Anne Swardson is a financial reporter for The Washington Post.