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Statistics For Economists

# Importance and Limitations of Statistics

## Importance of Statistics

Here we discuss the Importance and Limitations of Statistics.

1. ### Statistics and planning:

Statistics in indispensable into planning in the modern age which is termed as “the age of planning”. Almost all over the world the govt. are re-storing to planning for economic development.

1. ### Statistics and economics:

Statistical data and techniques of statistical analysis have to immensely useful in solving economical problems. Such as wages, price, time series analysis, demand analysis. Economics depends on statistics in regard of economic laws and theories.

It is almost impossible that the various economic theories and problems like demands, supply, wealth, value, utility etc. are studied properly without elementary knowledge of statistics. The economic laws relate to masses and tend to describe the behaviour of thousands of people.

Statistics have proved its important role in the field of business. Fer decision making it provides the quantitative bases in all aspects of business operation. For example, a successful businessman must sell what his customers want in the right types and quantities.

Statistics helps him to plan production according to the needs and wants of the consumers. The quality of products can also be checked effectively by using statistical methods. Statistics also used in management and administration.

1. ### Statistics and industry:

In industry statistics is widely used in quality control. In production engineering to find out whether the product is conforming to the specifications or not. Statistical tools, such as inspection plan, control chart etc.

1. ### Statistics and mathematics:

Statistics are intimately related recent advancements in statistical technique are the outcome of wide applications of mathematics.

1. ### Statistics and modern science:

In medical science, the statistical tools for collection, presentation and analysis of observed facts relating to causes and incidence of dieses and the result of application various drugs and medicine are of great importance.

1. ### Statistics, psychology and education:

Statistics plays an important role in education and physiology. statistics has found wide application such as, determining or to determine the reliability and validity to a test, factor analysis etc. Analytical purpose problem has to be based on a sample representative.

And unbiased samples are possible to get statistics. Statistics is used to collect data of various aspects society, from the earliest days, therefore, it is also very important in sociology.

1. ### Statistics and war:

In war the theory of decision function can be a great assistance to the military and personal to plan “maximum destruction with minimum effort.”

Statistics has proved its important role in the field of business. Fer decision making it provides the quantitative bases in all aspects of business operation. For example, a successful businessman must sell what his customers want in the right types and quantities.

Statistics helps him to plan production according to the needs and wants of the consumers. The quality of products can also be checked effectively by using statistical methods. Statistics also used in management and administration.

1. ### Statistics and Banks:

Statistics plays a vital role for all types of banks. They use statistics for the number of purposes. The commercial banks must have an up-to-date knowledge about the deposits of people and calls for withdrawal of money at different time periods.

Because they work on the principle that people can’t withdraw their money at the same time and they earn profits out of these deposits by lending to others on interest.

1. ### Statistics and Insurance Companies:

Statistics is backbone of Insurance companies. Because death rate and mortality rates can be find with the help of statistics. On basis of these statistics insurance companies quotes the rate of premium.

## Limitations of Statistics

1. ### Statistics is unable to explain individual items:

Statistics are aggregates of facts and statistics only deals with aggregate of facts. It always study a group of values instead of single observation studies the mass of phenomena and the conclusion on certain characteristics obtained.

1. ### Statistics are unable to study qualitative characters:

In general, statistics studies only the quantitative characters of the given problems instead of qualitative characters.

Statistics does not deal with qualitative aspects like honesty, morality, character, friendship, etc. It only deals with numerical measured facts and statistical techniques are useful for the analysis of quantitative data.

1. ### Statistical results are not accurately correct:

There are only a few results that are accurately correct in statistics and almost all are only approximately correct.

In other words, a hundred percent accuracy is impossible in statistical work because statistical laws are based on average.

1. ### Statistics deal with average:

Statistics deals with averages that are obtained from different individual items. The laws of statistics are true only on average.

1. ### Statistics is only one of the methods of studying a given problem:

The best solution under all conditions of the given problem is not p by the statistical methods.

Statistics cannot be of much help in studying the provided problem, like a country’s culture, religion, and philosophy unless they are supplemented by other evidence.

1. ### Statistics is liable to be misused:

The greatest limitation of statistical science is that it can be misused. Only a statistician or an adept person handle statistical data properly and scientifically.

Statistics requires great expertise and experience for application. Statistical methods, if misused by incompetent, unskilled and inexperienced persons, it may lead to false conclusions.

1. ### Qualitative Aspect Ignored:

The statistical methods don’t study the nature of phenomenon which cannot be expressed in quantitative terms.

Such phenomena cannot be a part of the study of statistics. These include health, riches, intelligence etc. It needs the conversion of qualitative data into quantitative data.

1. ### Too many methods to study problems:

In this subject, we use so many methods to find a single result. Variation can be found by quartile deviation, mean deviation or standard deviations and results vary in each case.

“It must not be assumed that the statistics are the only method to use in research, neither should this method of considered the best attack for the problem.” — Croxton and Cowden.

1. ### Results are true only on average:

As discussed above, here the results are interpolated for which time series or regression or probability can be used. These are not absolutely true.

If the average of two sections of students in statistics is the same, it does not mean that all the 50 students are section A has got the same marks as in B. There may be many variations between the two. So we get average results.

1. ### Statistical laws are not exact:

Statistical laws are not exact as in the case of natural sciences. These laws are true only on average. They hold good under certain conditions. They cannot be universally applied. So statistics have less practical utility. Statistical concepts are same for all sciences and statistical law and rules do not hold good in every case.

1. ### Nature of Causes:

Statistics can’t change the nature of causes affecting the statistical data: It just provides tools for analysis.