Discrimination and Freedom of Speech: Is there a Benefit from Political Correctness?

This paper shows how Political Correctness may eliminate market-discrimination (i.e., wage-gaps). The rationale for this effect is that speech may permit others to gauge the viability of discriminatory actions in a social context. Political Correctness can, hence, increase the welfare of the discriminated group despite speech being per-se harmless. The paper contributes to the literature on Political Correctness, by pointing out non-trivial benefits from it; to the literature on discrimination, by suggesting an alternative mechanism for discrimination; and to legal theory, by exposing some trade-offs involved with the freedom of expression. The model is consistent with real-life phenomena like the unequal ``forbidding of words'', the social segregation and integration patterns, and the failure of hate-speech laws to reduce discrimination.