Use of Statistics in Economics: Origin, Meaning and Other Details!
Origin and Development of Statistics:
Today, statistics or more specifically statistical method is used extensively in almost all phases of human endeavour.
In ancient times, it dealt with the affairs of the state, like collection of information (or data) regarding population and property or wealth of the state so as to sub-serve political purposes of rulers. Today, its influence has spread to various areas, such as agriculture, business, economics, medicine, biology, education, electronics, sociology, psychology, political science, and many other branches of science and technology.
The origin of the word statistics may be traced to the Latin word ‘status’ or the Italian word ‘statista’ from or the German word ‘statistics’, meaning political state. As time progressed, the idea behind the word statistics has undergone a phenomenal change. Over time, the character of information as provided has been extended to any particular sphere of human activity. Statistics as statistical data forms the backbone of many discipline. By statistical’ data we mean numerical statement of facts while statistical methods deal with information of the principles and techniques used in collecting and analysing such data.
Meaning of Statistics:
The word ‘Statistics’ was first introduced by a German Scholar, Gottfried Achenwall, in the middle of the 18th century. From the very name, it is felt that it must be related to the administrative functioning of a state supplying facts regularly and quantitatively regarding its various fields of administration. Today, statistics as a separate discipline from mathematics is closely associated with almost all branches of education and human endeavour which are mostly numerically representable. In modem times, it has innumerable and varied applications both qualitatively and quantitatively.
To be more precise, statistics refers to classified facts that represent the conditions of the people in a state especially those facts which can be stated in numbers or in any tabular or classified arrangements. One of the widely accepted definitions came from Horace Secrets. He defines statistics as, “By statistics we mean aggregate of facts, affected to a marked extent by a multiplicity of causes numerically expressed, enumerated or estimated according to reasonable standards of accuracy, collected in a systematic manner for a predetermined purpose and placed in relation to each other.”
This definition reveals the following characteristics of statistics:
(i) Numerical data should be aggregate of facts. Single factor isolated facts, or unrelated figures do not constitute statistics,
(ii) Data should be affected to a marked extent by multiplicity of causes. For instance data on malnutrition is affected not only by poverty but also by a host of other factors like hygienic rules, etc.
(iii) Data should be numerically expressed.
(iv) Data should be enumerated or estimated with accuracy as far as practicable.
(v) Data should be collected in a systematic manner.
(vi) Data should be collected to serve a predetermined purpose.
(vii) Data should be placed in order in relation to each other.
Croxton and Cowden defined statistics as “the science which deals with the collection, analysis and interpretation of numerical data”.
Relation with Economics:
Various concepts of economic theory, such as functional relationship among variables are usually stated in terms of algebra, symbols, calculus and so on. To analyse various social and economic phenomena, economic theory can be better studied and analysed in terms of ‘appropriate’ numbers. Such numbers, that is, statistics presents facts on the basis of a mass of figures. It helps comparison of facts.
It establishes relationship between variables like price and quantity demanded or quantity supplied, global warming and agricultural output, money supply and price level and so on. Thus, economics as a discipline is linked up with statistics on many occasions. Today, we see that economic growth in India is hampered by faulty policies and better economic policymaking largely depends on the availability of improved data or statistics. Businessmen also find statistics as an indispensable tool in their regular activities.
The study of modem economics requires mathematical and statistical foundation. With the development of mathematics and statistics over the passage of time, econometric methods have been developed. We thus see wide applications of statistics in various fields.
Data collection is just one aspect of descriptive statistics. Data usually collected during the course of investigation is not only unorganised and raw but also large in quantity. These data normally do not provide information that one needs. Once the data are collected statisticians engage themselves in classifying (i.e., compilation and tabulation) these statistical information.
By classification of data we mean the process of arranging data so that these can be analysed for a predetermined purpose of the analysers. Mere information collection is not at all significant. Classification of data that is, the process by which data are arranged or grouped into homogeneous classes and categories is thus required to know the scope and purposes of data so that statistical analysis becomes possible and intelligible to all. Usually, an investigator classifies data on households on the basis of their age, sex, education, income, expenditure, nature of jobs, etc.
Statistical information are usually classified under four following aspects:
(a) Qualitative aspect;
(b) Quantitative aspect;
(c) Time-dimension or time-chronological data and
(d) Geographical or (spatial) locational aspect.
When the data collected are in the form of non-unquantifiable criterion or property, it is called qualitative form of data e.g., occupation of people in a region of a country, the standard of their educational attainments, health and religion, etc. Conversely, if the data are collected strictly in terms of conveniently measurable numerical units (length, weight or time following scientific (centimeter, gram, second or foot, pound, second) systems, it will surely possess some quantitative property e.g., different income tax rates imposed on various income earning classes by the Government.
Besides these two, data on a particular aspect are also collected at different periods, called the ‘time series’ data e.g.: Price fluctuations during the last 5-year Plan period in our country. And, finally, data on many aspects are also gathered from different locations of a country, they are called the spatial data, widely used in geographical studies. For ‘example, to implement grassroots inclusive regional planning, we require data on average rainfall in various places of our country; they are also called the cross-section’ data in statistical terminology.