What Statistics Does?

Statistics is an indispensable tool for the economist. Using its various methods, it serves several distinct purposes in the study of an economic problem.

It helps find the causes of a problem. With the help of both qualitative and quantitative facts, statistical methods help identify the causes behind an economic problem. Once the causes are known, it becomes easier to formulate policies to tackle it.

It makes economic facts precise and convincing. Statistics lets an economist present facts in an exact and definite form, aiding proper comprehension. Exact facts are more convincing than vague statements: saying that 310 people died in a recent earthquake in Kashmir is far more factual and persuasive than saying merely that hundreds of people died.

It condenses mass data into a few numerical measures. Measures such as the mean and variance summarise large bodies of data. It would be impossible to remember the incomes of every person in a large group, yet a single summary figure — the average income — is easy to remember. In this way Statistics gives a meaningful overall picture of a mass of data.

It finds relationships between economic factors. Statistics is often used to discover how one economic factor relates to another — for example, what happens to the demand for a commodity when its price rises or falls, whether its supply changes with its own price, or how consumption expenditure changes as average income rises. Whether such relationships exist can be checked by applying statistical methods to the data. In some cases an economist assumes a relationship and then uses statistical techniques to test whether that assumption is valid. …