STATISTIC FOR ECONOMICS 1
A guide to have better life
By
ROBERT MARBUN
Chapter 1: Concept of Economics &
Significance of Statistics in Economics
Introduction
• The word ‘Statistics’seems to have been derived from
the Latin word ‘Status’ or the Italian word ‘Statista’or the
German word ‘Statistik’or the Greek word ‘Statistique’,
each of which means a political state.
• The word ‘Statistics’was first used by German scientist
Gottfried Achenwall in 1749.
• He is known as the Father of Statistics.
• Some people regard statistics as data, facts or
measurements, while others believe it to be the study of
figures.
• In the early years, scope of statistics was primarily limited to
collection of data for determining the economic and social
conditions of the people living in different parts of the country.
• But with the passage of time, the scope of statistics widened.
For some time, statistics was regarded as a branch of
economics, but now, it has become as full-fledged
independent subject.
Statistics in Economics
• We need to know more about economic facts in terms of
numbers. Such economic facts are also known as data.
• The purpose of collecting data about these economic
problems is to understand and explain these problems in
terms of the various causes behind them.
• We may, therefore, also try to find those measures that
help to solve an economic problem.
• In Economics, such measures are known as policies.
• No analysis of an economic problem would be possible
without data on various factors underlying an economic
problem.
• And that, in such a situation, no policies can be
formulated to solve it.
• This is the basic relationship between Economics and
Statistics.
Statistics: Meaning
It is not easy to define statistics in a precise manner.
Statistics has been defined differently by different writers
from time to time, emphasizing precisely the meaning, scope
and limitations of the subject.
• In a Layman’s language, Statistics means ‘data’ or facts in
figures.
•
Statistics
Singular
Plural
(A) Definition of Statistics in Singular Sense
•
In singular sense, Statistics refers to statistical methods.
• These methods are regarding collection, organisation,
presentation, analysis and interpretation of data.
• So, in singular sense, Statistics is taken to mean as statistical
methods.
Stages of Statistical Study and the Related Statistical
Tools
(B) Definition of Statistics in Plural Sense
• In the plural sense, Statistics means ‘numerical facts
systematically collected’ as described by ‘Oxford
Dictionary’.
• Thus the simple meaning of Statistics in plural sense is
“data”
•
By data or Statistics, we mean quantitative facts that are
used in Economics.
Features of Statistics in Plural Sense
(a) Statistics are aggregate of facts - A single number does not
constitute statistics.
•
It is only the aggregate number of facts that is called statistics,
as the same can be compared and conclusion can be drawn
from them.
For example:
Not Statistics
1. Human has 2 legs.
2. Around 80,000 people dead
in USA due to COVID 19.
Statistics
1. Human has 2 legs, whereas cow
has 4 legs.
2. Around 80,000 people dead in USA
as compared to 25,000 people in
INDIA due to COVID 19.
(b) Statistics are numerically expressed –
• All Statistics are expressed in terms of numbers. Qualitative
aspects like 'small' or 'big' rich or 'poor' etc. do not constitute
Statistics.
• The statement will be called Statistics only if numerical data are
given or quantitative expression is Statistics, e.g., production of
wheat in India has increased by 25% between 2005 and 2015.
(c) Statistics are affected by multiplicity of causes
• Statistics are not affected by any single factor; but are
affected to a great extent by a number of factors affecting
together.
• Had they been affected by one factor alone then by
removing that factor they would lose all their significance.
(d) Statistics should be placed in relation to each other
•
For the purpose of comparison, data collected must be
homogenous.
•
It would be meaningless to compare the heights of
students with their pocket allowance because these
data are not homogenous.
•
Unless they have the quality of comparison they cannot be
called statistics.
(e) Statistics are collected for predetermined purpose
• The purpose of collection of data should be decided in
advance.
•
Data collected without purpose will be misleading and will
not serve the purpose of statistical enquiry.
(f) Statistics are enumerated or estimated according
to a reasonable standard of accuracy
• Statistical data must be reasonably accurate because
statistical data are collected to investigate statistical
enquiry.
• If the area of our enquiry is limited then we use enumeration.
• And if the scope of enquiry is wide then we will collect the
data by the method of estimation.
• Estimates cannot be accurate. Hence, the degree of
accuracy must be observed.
(g) Statistics are collected in a systematic manner
• Statistics should be collected in a systematic
manner.
• Before collecting them a plan must be prepared.
• No conclusion can be drawn from statistics collected in
haphazard manner.
If the above discussed features are present, data are
known as Statistics. Thus, all Statistics are numerical
statements of facts but all numerical statements of facts
are not Statistics.
Scope/ Subject Matter of Statistics
● Now –a-days the scope of Statistics has spread to economics, business,
industry, physics, chemistry and various other fields of knowledge.
● Scope/subject matter of Statistics can be classified into the two
broad categories.
Scope of Statistics
Statistical
Methods
Applied
Statistics
(A) Statistical Methods
● Statistical methods are the methods used in Statistics.
● The important methods of Statistics are given below:
(a) Collection of Data
(b) Organisation of Data
(c) Presentation of Data
(d) Analysis of Data
(e) Interpretation of Data
(B) Applied Statistics
● It is concerned with the application of statistical methods
used in interpreting the data to take decisions in solving
economic problems .
● Applied Statistics can be classified into two categories given
below:
(i) Descriptive Applied Statistics
● This deals with use of statistical methods to make a problem under
study comparable and easily understandable using past and
present data.
(ii) Scientific Applied/ Inferential Statistics
● This deals with use of statistical methods to draw conclusions and
take decisions to deal with various social, political and economic
problems.
Functions of Statistics
(a) Helps in understanding economic problem
● Statistics is an indispensable tool for an economist that
helps to understand an economic problem.
● Using its various methods, effort is made to find the causes
behind it with the help of the quantitative facts of the
economic problem.
(b) Presentation of facts in definite form
● Statistics enables an economist to present economic facts in
a precise and definite form that helps in proper
comprehension of what is stated.
● When economic facts are expressed in statistical
terms, they become exact.
● Exact facts are more convincing than vague statements.
(c) Statistics helps in condensing mass data into a few
numerical measures
● The numerical measures help to summarise data.
For example, it would be impossible for you to
remember the income of all the people in a data, if the
number of people is very large.
● Yet, one can remember easily a summary
figure like the average income that is obtained statistically.
● In this way, Statistics summarises and
presents meaningful overall information about a mass of
data.
(d) Establishes relation between factors
● Statistics is used in finding relationships between different
economic factors.
●
An economist may be interested in finding out, what happens
to the demand for a commodity when its price increases or
decreases ?
● Such questions can only be answered if any relationship exists
between the various economic factors that have been stated
above.
● Whether such relationships exist or not can be easily verified by
applying statistical methods.
(e) Helps in formulation of plans and policies
● Sometimes, formulation of plans and policies requires the
knowledge of future trends.
● That could be based on the data of consumption of past
years or of recent years obtained through surveys.
(f) Helps in evaluation of impact of policies
● Today, we increasingly use Statistics to analyse serious
economic problems such as rising prices, growing population,
poverty, etc., to find measures that can solve such problems.
● Further it also helps to evaluate the impact of policies in solving
the economic problems.
(g)
Inter-sectoral and inter-temporal
comparisons
● Statistics comprehends the numerical data
through inter-sectoral and inter-temporal
comparisons.
● Inter-sectoral comparisons refer to
comparisons across different sectors of the
economy.
● Inter-temporal comparison means
understanding of change in the magnitude of
the problem overtime.
Importance of Statistics in Economics
Statistics in Economics - A number of
economic problems can easily be understood
by the use of Statistics. It helps in
formulation of economic policies.
● The importance of Statistics in various parts
of economics has been discussed as follows:
(i) Statistics in consumption - To obtain the
knowledge of how different groups of people
spend their income forms Statistics relating
to consumption. The data of consumption are
useful and helpful in planning their budget and
improve their standard of living.
(a)
(ii)Statistics in production - The comparative
study of the production processes is done
with the help of Statistics. The Statistics of
production are very useful and helpful for
adjustment of demand and supply and
determining quantity of production of the
commodity.
(iii)Statistics in distribution – Statistical
methods are used in solving the problem of
distribution of national income among various
factors of production i.e.: land, labour, capital
and entrepreneur.
(b)Statistics in Economic Planning – Economic
planning is done to achieve certain targets
for growth of the economy using scarce
resources of the nation.
● Statistics helps in evaluating various stages
of economic planning through statistical
methods. Statistics helps in comparing the
growth rate.
● It helps to formulate plans to achieve pre
determined objectives.
● It measures the success and failure of plans
and accordingly guides to apply corrective
measures.
(c) 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 market.
● Statistical tools are very important for the
detailed analysis of money transactions in the
business.
(d) Statistics in Administration –
● Formulation of a policy involves Statistics.
● The state gathers the facts relating to
various aspects with the help of statistical
methods and principles.
● It helps the state to achieve targets with the
help of optimum utilisation of scarce
resources.
Statistics
in Business
Statistics in
Economics
Importance
of Statistics
in Economics
Statistics
in
Administration
Statistics
in
Economic
Planning
Limitations of Statistics
(a) Statistics deals with numerical facts only
● Statistics studies only such facts as can be
expressed in numerical terms.
● It does not study qualitative phenomena like
honesty, friendship, wisdom, health,
patriotism, justice, etc.
(b) Statistics does not deal with individuals
● Statistics studies only the aggregates of
quantitative facts. It does not study any
particular unit; it has no relevance in
statistics.
● Therefore, data are either underestimated or
overestimated.
(c) Homogeneity of data, an essential requirement
● To compare data, it is essential that statistics
are uniform in quality.
● Data of different qualities and kinds cannot be
compared. For example, production of food
grains cannot be compared with the production
of cloth.
(d) Statistics are true only on an average
● Most statistical findings are true only as
averages. They express only the tendencies.
● Unlike the laws of physical science or chemistry,
statistical observations are not absolutely true.
They are not always valid under all conditions.
(e) Without reference, statistical results may
prove to be wrong - In order to understand
the conclusions precisely, it is necessary that
the circumstances and conditions under
which these conclusions have been drawn are
also studied; otherwise they may prove to be
wrong.
(g)Prone to Misuse - Misuse of Statistics is
possible; Statistics may prove true what is
actually not true.
● It is usually said “statistics are like clay by
which you can make a god or a devil, as you
please”.
● The results may be manipulated according to
suitability of one’s own interest.
(e) Statistics needs special expertise
● Statistics can be used only by those persons
who have special knowledge of statistical
methods.
● It can therefore, be said that data in the hands
of an unqualified person is like a medicine in the
hands of a quack who may abuse it out of
ignorance leading to dangerous consequences.
Statistical Methods are No Substitute for Common Sense
● This is a statement of caution to the students of statistics. It
urges the students not to use statistics devoid of their common
sense.
● You may find some spurious relationships, like larger the
number of doctors in an area greater are the deaths in that
area.
● It may be true statistically, but does not match with common
sense.
● Hence, never propagate any statistical conclusion in
case it offends your common sense.
Distrust of Statistics
Inspite of great use of Statistics, there is some amount of misgiving
in the minds of a few economists regarding their reliability.
I. There are three degrees of lies: lies, demand lies and Statistics.
II. Statistics can prove anything.
III. Statistics can prove nothing.
IV. Statistics can blow the wind in whichever direction they like.
V. Statistics are like clay of which you can make a God or a Devil,
as you please.
Happy Statistic Life