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Deciphering the Economics

WHAT IS STATISTICS IN ECONOMICS ?

Origin and Growth of Statistics The term ‘STATISTICS’ has been derived from the Latin word ‘STATUS’, which means political state.

Germans have spelled it as ‘STATISTIK’. The term ‘Statistics’ was first used by German scientist Gottfried Achenwall in 1749. He is known as the Father of Statistics.

Definition Of Statistics

The systematic treatment of quantitative expression is known as ‘statistics’. Not all quantitative expressions are statistics we will see that certain conditions must be fulfilled for a quantitative statement to be called statistics.

Statistics can be defined in two ways:

a. In Singular sense

b. In a Plural sense

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statistics

Statistics defined in Singular sense (as a statistical method)

According to Croxton and Cowden, “Statistics may be defined as a science of collection organization presentation, analysis, and interpretation of numerical data”.

  1. Collection of data : Data should be gathered with maximum care by the investigator himself or obtained from reliable published or unpublished sources.
  2. Organisation of data : Figures that are collected by an investigator need to be organised by editing, classifying and tabulating.
  3. Presentation of data : Data collected and organised are presented in some systematic manner to make statistical analysis easier. The organised data can be presented with the help of tables, graphs, diagrams etc.
  4. Analysis of data : The next stage is the analysis of the presented data. There are large number of methods used for analysing the data such as averages, dispersion, correlation etc.
  5. Interpretation of data : Interpretation of data implies the drawing of conclusions on the basis of the data analysed in the earlier stage.

STATISTICS DEFINED IN PLURAL SENSE (as statistical data)

According to Horace Secrist, “By statistics, we mean aggregates of facts affected to a marked extent by a multiplicity of cause numerically expressed, enumerated or estimated according to reasonable standards of accuracy, collected systematically for a predetermined purpose and placed with each other”.

  1. Statistics are aggregates of facts : A single observation is not statistics, it is a group of observation. Eg., A single age of 30 years is not statistics but a series relating to the ages of a group of persons is statistics.
  2. Statistics are affected to a marked extent by multiplicity of causes : Statistics are generally not isolated facts they are dependant on, or influenced by an number of phenomena.
  3. Statistics are numerically expressed : Qualitative statements are not statistics unless they are supported by numbers.
  4. Statistics are enumerated or estimated according to reasonable standard of accuracy : Enumeration means a precise and accurate numerical statement. But sometimes, where the area of statistical enquiry is large, accurate enumeration may not be possible. In such cases, experts make estimations on the basis of whatever data is available. The degree of accuracy of estimates depends on the nature of enquiry.
  5. Statistics are collected in a systematic manner : Statistics collected without any order and system are unreliable and inaccurate. They must be collected in a systematic manner.
  6. Statistics are collected for a pre-determined purpose : Unless statistics are collected for a specific purpose they would be more or less useless.
  7. Statistics are placed in relation to each other : Statistical data are often required for comparisons. Therefore, they should be comparable periodwise, regionwise, commodity wise etc. When the above characteristics are not present a numerical data cannot be called statistics. Thus, “all statistics are numberical statements of facts but all numberical statement of fact are not statistics.

FUNCTIONS OF STATISTICS

  1. Statistics simplifies complex data : With the help of statistical methods a mass of data can be presented in such a manner that they become easy to understand.
  2. Statistics presents the facts in a definite form: This definiteness is achieved by stating conclusions in a numerical or quantitative form.
  3. Statistic provides a technique of comparison. Comparison is an important function of statistics i.e., Period wise, country wise etc..
  4. Statistics studies relationship : Correlation analysis is used to discover functional relationship between different phenomena, for example, relationship between supply and demand, relationship between sugarcane prices and sugar, relationship between advertisement and sale.
  5. Statistics helps in formulating policies : Many policies such as that of import, export, wages, production, etc., are formed on the basis of statistics.
  6. Statistics helps in forecasting : Statistics also helps to predict the future behaviour of phenomena such as market situation for the future is predicted on the basis of available statistics of past and present.

IMPORTANCE OF STATISTICS

1.     Statistics in Economics

Several economic problems can easily be understood by the use of Statistics. It helps in the formulation of economic policies, e.g., basic economic activities like production, consumption, etc. use Statistics.

The importance of Statistics in various parts of economics has been discussed as follows :

  • Statistics in consumption. To obtain the knowledge of how different groups of people spend their income form Statistics relating to consumption. The data of consumption are useful and helpful in planning their budget and improve their standard of living.
  • Statistics in production. The Statistics of production are very useful and helpful for adjustment of demand and supply and determining quantity of production of the commodity.

Statistics in distribution. Statistical methods are used in solving the problem of distribution of national income among various factors of production i.e., land, labor, capital, and entrepreneur.

Statistics in Economic Planning

Economic planning is done to achieve certain targets for the growth of the economy using scarce resources of the nation. Statistics helps in evaluating various stages of economic planning through statistical methods.

According to Tippett,

“Planning is the order of the day, and without Statistics planning is inconceivable.”

Statistics help in comparing the growth rate. It helps to formulate plans to achieve predetermined objectives. It measures the success and failure of plans and accordingly guides to apply corrective measures.

  • Statistics in Business

Statistical tools play a very important role in major business activities.

The producer depends upon market research to estimate market demand and the market research is based on

Statistics. The trader depends heavily on methods of statistical analysis to study the market.

Statistical tools are very important for the detailed analysis of money transactions in the business.

  • Statistics in Administration

Formulation of a policy involves Statistics. The state gathers the facts relating to population, literacy, employment, poverty, per capita income, etc., with the help of statistical methods and principles. It helps  the state to achieve targets with the help of optimum utilization of scarce resources

LIMITATIONS OF STATISTICS

It does not study the qualitative aspect of a problem: The most important condition of statical study is that the subject of investigation and inquiry should be capable of being quantitatively measured. Qualitative phenomena e.g., honesty, intelligence, poverty, etc., cannot be studied in statistics unless these attributes are expressed in terms of numerals

It does not study individuals: Statistics is the study of mass data and deals with aggregates of facts which are ultimately reduced to a single value for analysis. Individual values of the observation have no specific importance. For example, the income of a family is, say Rs. 1000, does not convey statistical meaning while the average income of 100 families says Rs. 400, is a statistical statement.

Statistical laws are true only on an average: Laws of statistics are not universally applicable like the laws of chemistry, physics, and mathematics. They are true on average because the results are affected by a large number of causes. The ultimate results obtained by statistical analysis are true under certain circumstances only.

Statistics can be misused: Statistics is liable to be misused. The results obtained can be manipulated according to one’s own interest and such manipulated results can mislead the community.

Statistics simply is one of the methods of studying a phenomenon: Statistical calculations are simple expressions that should be supplemented by other methods for a complete comprehension of the results. Thus statistics is only a means and not the end.

Statistical results lack mathematical accuracy: The result drawn from statistical analysis are normally in approximates.

As the statistical analysis is based on observations of mass data, several inaccuracies may be present and it is difficult to rectify them. Therefore, these results are estimates rather than exact statements. Statistical studies are a failure in the fields where one number percent accuracy is desired

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