Page 12 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Statistical Methods in Economics

Notes Dictionary, “Statistics—(as treated as plural): numerical facts, systematically collected, as Statistics
of population, crime etc. (treated as singular): Science of collecting, classifying and using Statistics.”
• If Statistics are collected in a haphazard manner, it might fail to give the accurate result. It is,
therefore, essential that statistics must be collected in a systematic manner so that they may
Conform to reasonable standard of accuracy.
• The Statistics should be comparable. If they are not comparable, they lose part of their value
and thus the efforts in collecting them may not prove to be as useful as the requirements may
be. It is necessary that the figures which are collected should be a homogeneous so as to make
them comparable and more useful.
• On the basis of the above description it may be said that numerical data cannot be called Statistics
hence “All Statistics are numerical statements of facts but all numerical statements of facts may
not essentially be Statistics.”
• The scope of statistics are concerned with the new dimensions in the definition of statistics. In
other words we can say—Are statistics a science or an art or both ? Science is concerned with
the systematised body of knowledge. It shows the relationship between cause and effects. So
far as art is concerned, it refers to the skill of collecting and handling of data to draw logical
inference and arrive at certain results. Statistics may be used as a science and as an art. In this
regard the following definitions may be given:
• The importance of statistics is now being felt in almost every field of study. In fact, it is difficult
to mention a subject which does not have any relation with the science of statistics. Alfred
Marshall had mentioned that, “Statistics are the straw out of which, I like every other economist
have to make the bricks.” As a matter of fact statistical methods are common ways of thinking
and hence are used by all types of persons. Suppose a person wants to purchase a car and he
goes through the price list of various companies and makers, to arrive at a decision, what he
really aims at is to have an idea about the average level and the range within which the prices
vary, though he may not know a word about these terms. No doubt to say that statistical methods
are so closely connected with the human actions and behaviour that all human activity may be
explained by statistical method. The importance of statistics can be shown in the following
heads:
• In the study of economics the use of statistical methods are of great importance. Most of the
economic principles and doctrines are based on the study of a large number of units and their
analysis. By statistical analysis we can study the ways in which people spend their income over
food, rent, clothing, entertainment, education etc. For example, if the law of demand is to be
analysed then we have to make an idea about the effect of price changes on demand both for an
individual and for a market. For this purpose a large number of data and figures would be
collected. On the basis of the available information, the demand schedule can be prepared and
then the law of demand can be formulated. We thus find that in the field of economics, the use
of statistics is indispensable.
• Today planning cannot be formulated without statistics. The problems like over production,
unemployment, low rate of capital formation etc. which are the major characteristics of
developing countries can be understood with the help of statistical data. National Sample Survey
Scheme was started to collect statistical data for use in planning in India. Economic planning is
done to achieve pre-determined objectives and goals. They have to be expressed in quantitative
terms. We, thus, find that in the field of economic planning the use of statistics is indispensable.
• Bankers, Stock Exchange Brokers, insurance companies, investors and public utility concerns
all make extensive use of statistical data and technique. A banker has to make a statistical study
of business cycles to forecast a probable boom. On the basis of this study a banker decides
about the amount of reserves that should be kept.
• Statistics are very important to a State as statistics help in administration. In all the fields where
the State has to keep accurate records and information, statistical systems are adopted. For
example, for making the economic plan the State has to collect data or information, it has to
estimate the figures of National Income to find out the real position of the country. For this

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