Economics 4 Marks Question

Subject matter of statistics could be studied, both by descriptive method, as well as, inferential method. In descriptive method, the data related to whole of the population is collected and analysed while in inferential method, the data is collected from a sample drawn from the population.
For example, there are 225 employees working in ABC Publication. To find the average salary by descriptive method, data related to the salary of each of the 225 employees will be collected, added and the divided by 225 to find the average salary.
However, to find the average salary by inferential method, a sample of 50 or 60 employees will be drawn from the given population of 225 employees The data related to the salary of these employees will be collectively added and then divided to find the average salary. The average so computed will be deemed to be the average salary of all the employees.

There is an interesting story which is told to make fun of statistics. It is said that a family of four persons (husband, wife and two children) once set out to cross a river. The father knew the average depth of the river. So he calculated the average height of his family members. Since the average height of his family members was greater than the average depth of the river, he thought they could cross safely. Consequently some members of the family (children) drowned while crossing the river.
Similarly, a person conducted a survey and found that the places where there were larger numbers of hospitals, death rates were higher. So, he concluded that hospitals are responsible for increasing death rates.
Another example can be situation when you collect data on birth rate and rainfall. You find that the years when there was higher rainfall, birth rate was high and you conclude that rainfall is one of the causes of high birth rate.
Therefore, we say that statistics are not substitute for common sense.

Positive Economics: Economics is a science, however in exact. As regards the nature of science there is a school of thought which says that economics should confine itself to pure science so that it may not indulge in value judgment. In case of pure and positive science the analysis is confined to cause and effect relationships. In other words, it deals only with 'what is" and not what ought to be. It is said economics is not to suggest but simply state in terms of cause and effect relation and leave the matter of choice to the individual concerned. According to Robbins 'Economics is neutral between ends'. Neutrality between ends denotes lack of concern about objectives or goals, which may be noble or otherwise. It is not for economists to pass value judgments. Economics only studies facts and makes generalizations from them. An Economist, being a scientist, tries to study economic phenomena in a dispassionate and unbiased manner. Complete neutrality between ends is, however, neither feasible nor desirable.
Normative Economics: If economics is a normative science it would work for finding what ought to be. The focus will be on the idealistic aspect of the situation or phenomena.
Professor A C Pigou has put the importance of normative aspect of Economics very beautifully, “our impulse is not the philosopher's impulse, knowledge for the sake of knowledge but rather the psychologist's knowledge for the healing that knowledge may bring." It is a positive statement that 26.4% people live below poverty line in India. It is a normative statement that poverty should be eradicated. Both are important. As by both statements we shall get to know the gap we need to bridge and we shall be able to formulate policies accordingly.

In singular sense, statistics refers to the methods adopted for scientific and empirical study. According to Croxton and Cowden, "Statistics may be defined as a science of collection, presentation, analysis and interpretation of numerical data." Whenever we collect data, we also need to organize it, present it so as to make it attractive, analyze it to derive its meaning and finally interpret it to reach at right conclusions.In singular sense, statistics is summation of following:

1. Collection of Data: It is the first step in a statistical enquiry. There are two ways of collecting data: primary and secondary. The data provide the basis of statistical enquiry. If data is biased, the entire study will become unreliable. Therefore, it has to be collected with great caution.
2. Organization of Data: The next step after collection of data is to organize this data in a proper way. Organizing involves classification, grouping and editing.
3. Presentation of Data: Once the collected data are organized the these are presented in a systematic manner to make statistical analysis clear and easier. Data can be presented I through tables, diagrams, graphs or pictures.
4. Analysis of Data: After presentation data are analyzed by using averages, dispersion, correlation, regression, time series analysis etc. it helps us to reach at some conclusions on the basis of data.
5. Interpretation of Data: It is the final stage of statistical study. In this stage data are used to derive some conclusions to take decisions.

Marshall pointed out that wealth is not an end in itself; but it is only a means to an end; end being promotion of human welfare. Thus, according to Marshall, wealth is only a secondary thing; it is man and his ordinary business of life which is the primary object of economic study.
According to Alfred Marshall, Economics is the study of mankind in the ordinary business of life. It examines that part of individual and social action which is most closely connected with the attainment and Part with the use of the material requisites of the well being. Thus, it is one side of the study of wealth and more important side is a part of study of the man.
According to A. C. Pigou “The range of our enquiry becomes restricted to that part of social welfare that can be brought is directly or indirectly into relation with the measuring rod of money."
According to Cannan, “The aim of e political Economy is the explanation of the general causes on which the material welfare of the human being depends."
Critical Evaluation of the Welfare Definition: fly Economics studies not only material B things but also non material things.

1. Welfare is a subjective thing and varies from person to person.
2. Goods like liquor, opium and cigarettes etc are harmful to health but are studied in economics as they are scarce in relation to demand for them.

Statistics is defined as aggregate of numerical facts. A single number does not constitute statistics, for simple reason that such figures cannot be compared.
For example, if it is stated that there are 1000 persons in our village, then it has little statistical significance. This information, although expressed in a numerical figure is not statistics.
But if it is stated that there are 300 men, 400 women and 300 children in our village, it makes more statistical sense as this data conveys useful information. So, these figures are statistics. So, on the basis of the above discussion it can be concluded that all statistics are figures, but all figures are not statistics. Figures which convey meaningful and useful information fall under the preview of statistics.

Statistical data is essential for formulating policies of economic development.
This can be understood with the following examples:
Example 1: If the government wants to formulate or modify labour laws, then the government will require statistical data on working conditions, number of working hours and minimum wages received by workers.
Example 2: If the government is formulating policy for poverty alleviation, then data related to it will be required.

The distrust of statistics is not justified. The person who is handling statistics may be a liar or a dishonest person, but that would be the fault of the person and not of statistics.
For example, if a ayurvedic doctor prescribes allopathic medicine to a patient and the medicine proves to be fatal, then in such an instance the medicine cannot be blamed. The fault lies with the doctor. Same is the case with statistics.
The person using statistics should not take them at their face value. He should check the results. Also, only experts should handle the statistics, otherwise they may be misused.
Many economists have most rightly observed, "Statistical methods are the most dangerous tools in the hands of an inexpert. The science of statistics is a most useful servant but only of great value to those who understand its proper use."
So, it can be concluded that if statistical facts are misused by some people then it would be wrong to blame statistics. It is the people who are to be blamed.

In plural sense, “statistics means numerical facts systematically collected'.
In simple words, statistics in plural sense is data.
The main features of statistics as a numerical data are:

1. Statistics is an aggregate of facts: A single number does not constitute statistics. Only when numbers are placed in relation to each other and conclusions can be drawn from it then they constitute statistical data.
2. Statistics is numerically expressed: Statistics are expressed only in quantitative figures. Qualitative aspects of a problem do not constitute statistics.
3. Statistics has reasonable standards of accuracy: Statistics are reasonably accurate, though it has limitations. The accuracy of the statistical data depends upon the purpose of investigation, nature, size of sample and method of collecting data.
4. Statistics is placed in relation to each other: Statistical data should be comparable. Data should be placed in such a way that these can be compared.

Common sense is a very valuable pre-requisite to the usage of statistics. Statistics should be in the right hands, i.e., if it goes in wrong hands of people lacking complete knowledge, experience and common sense it is likely to be misused. It can also spread disaster due to its misuse. Example of the foolish father, who knew the average depth of the river to be crossed calculated the average height of his family members. His wrong conclusion about average height of his family members led to the drowning of some members of his family (his children) while crossing the river. So it was the lack of common sense on the part of the father which spread disaster. It was not the fault of statistical method used but the lack of common sense on the part of the father.