Statistical Tools Used in Economic Analysis

Some of the statistical tools used in economic analysis are as follows:

1. Collection of data (Primary or secondary)

2. Editing

3. Classification and tabulation

4. Tools of presentation: Diagrams and Graphs (Of various types)

5. Measures of Central Tendency (Mean, Mode, Median, G.M, H.M)

6. Measures of dispersion (Q.D, M.D., S.D.)

7. Moments, Skewness and Kurtosis

8. Correlation and regression

9. Index numbers (Using various methods)

10 Time Series

11. Sampling (Using various methods)

12. Business Forecasting (Using Interpolation Extrapolation etc.)

13. Analysis of Variance

14. Many other methods.

Distrust of Statistics:

What does distrust mean? It means lack of faith or confidence or we may call it as disbelief in statistics. Why does it rise and how can it be omitted or reduced considerably? Different people have different concepts about it. Some do not agree that statistics is lies.

“In the earlier times people had no statistics and they have to fall back on lies. Hence the huge exaggerations of primitive literature-giants or miracles or wonders! They did it with lies and we do it with statistics, but it is all the same.”—Stephen Leacock

But all the Economists or Statisticians do not agree. According to them, with the data of statistics we may prove anything of our wish.

“There are three degrees of lies—lies, damned lies and statistics.” —Disraeli

Misuse of data can be made by biased persons with only small changes made in the data. Statistics do not prove themselves anything but it is a tool to prove and if a tool falls in the wrong hands it can also stop the machine forever instead of repairing it. Figures do not prove themselves anything; those are innocent and can be misused easily.

The collection of data and analysis must be undertaken by experienced and honest person, to avoid its misuse. Thus a good statistician requires, ‘good judgment, broad knowledge and experience and common sense.’

”Statistical Methods are most dangerous tools in the hands of an inexpert”. —Yule and Kendall

For example alcohol can be used as base for Homeopathic medicines but in case it is taken in huge quantities by drunken persons, it may prove fatal. Similarly if medicines are used by qualified persons, it heals the patients but if it falls in the hands of a quack, he may distribute it to the people as drugs and narcotics. Knife can be used for cutting vegetable and fruits but it can also cut the finger of a child if he tries upon it.

“Statistics, as a tool, require proper usage and the results obtained through statistical analysis require intelligent interpretation.” —F.C. Mill

Following point must be kept in mind while analyzing:

1. Sources of information.

2. Reliability of information

3. Its true sense and significance

4. Utility of data in regard to problem undertaken.

5. Manner of summarisation.

6. Amount of data in regard to problem being undertaken.

Now lastly how can we remove or minimise distrust:

(a) As discussed earlier statistics has some limitations and those must be kept in mind throughout the process.

(b) Data must be collected by experienced and honest enumerators.

(c) Data must be edited before analysis.

(d) Enumerators should not be biased.

(e) Tool chosen for analysis must be suitable and should be applied with the guidance of experienced guide.