The scope of statistics is confined to two main aspects – the classification and application of statistics. In this article, we will explore the application of statistics in important areas of our economy.
Application of Statistics
In the age of information technology, statistics has a wide range of applications. Let’s look at some important areas of application of statistics:
For the effective functioning of the State, Statistics is indispensable. Different department and authorities require various facts and figures on different matters. They use this data to frame policies and guidelines in order to perform smoothly.
Over the years, with the change in the nature of functions of the State from maintaining law and order to promoting human welfare, the scope of the application of statistics has changed too.
Today, the State authorities collect statistics through their agencies on multiple aspects like population, agriculture, defense, national income, oceanography, natural resources, space research, etc.
Further, nearly all ministries at the Central as well as State level, rely heavily on statistics for their smooth functioning. Also, the availability of statistical information enables the government to frame policies and guidelines to improve the overall working of the system.
Economics is about allocating limited resources among unlimited ends in the most optimal manner. Statistics offers information to answer some basic questions in economics –
- What to produce?
- How to produce?
- For whom to produce?
Statistical information helps to understand the economic problems and formulation of economic policies. Traditionally, the application of statistics was limited since the economic theories were based on deductive logic. Also, most statistical techniques were not developed enough for application in all disciplines.
However, today, with computers and information technology, statistical data and advanced techniques of statistical analysis are a boon to many.
In economics, many scholars have now shifted their stand from deductive logic to inductive logic in order to explain any economic proposition. This inductive logic requires the observation of economic behavior of a large number of units. Hence, it needs strong statistical support in the form of data and techniques.
Applications of statistics and its techniques
Test and Verification of Economic Theories or Principles or Hypothesis
Economists have developed various theories and principles based on deductive reasoning in the areas of production, distribution, exchange, consumption, business cycles, taxation, etc.
These theories are for academic interest only unless they are put through an empirical test or verification. Statistics enables us to compare these theories in real-life situations.
The understanding and study of Economic Problems
Statistics also help us in understanding various economic problems with precision and clarity. Further, it enables us to frame policies in relevant areas for better results.
To give you an example, wealth and income statistics help in the framing of policies for reducing disparities of income. On the other hand, price statistics help us in understanding the problem of inflation and the cost of living in the economy.
Economic planning is an important aspect of a country. For effective economic planning, the authorities require information regarding different components of the economy.
This allows them to plan for the future efficiently. Statistics help in providing data as well as tools to analyze the data. Some powerful techniques are index numbers, time series analysis, and also forecasting. These are immensely useful in the analysis of data in economic planning.
Further, statistical techniques help in framing planning models too. In India, the five-year plans extensively use statistical tools.
Measurement of National Income and Components
Statistics also allows the study and measure of various national income components and their compilations. It collects information on income, investment, saving, expenditure, etc and establishes the relationships between them.
Business Management and Industry
In today’s world, business management is a complex process. This is due to a change in:
- Technical know-how
- Quantum of production
- Number of employees
- Capital deployed
- Competition levels, etc.
Also, while planning, organizing, controlling, and communicating, the management is confronted with many alternative courses of action. The trial and error method is not a great way of making decisions.
Therefore, statistical data and powerful statistical techniques of probability, expectations, sampling, significance test, estimation theory, forecasting, etc. play an important role.
According to Chao, “Statistics is a method of decision-making in the face of uncertainty on the basis of numerical data and calculated risks.” Hence, statistics provides information to businesses which help them in making critical decisions. Further, in Industry, Statistics helps in the field of Quality Control.
Social Sciences and Natural Science
In social sciences, especially sociology, statistics are used in the field of demography for studying mortality, fertility, marriage, population, and growth. Also, in psychology and education, the intelligence quotient (IQ) is determined using statistics.
Biology and Medicine
In biology and medical sciences, there is regular use of statistical tools for collecting, presenting, and also analyzing the observed data pertaining to the causes of the incidence of diseases.
For example, the statistical pulse rate, body temperature, blood pressure, etc. of the patients helps the physician in diagnosing the disease properly. Additionally, statistics help in testing the efficacy of manufacturing drugs or injections or medicines for controlling or curing certain diseases.
Statistics help in the conduction of research in new areas and the opening of newer vistas of knowledge to mankind.
Q1. Which are the important areas of application of statistics?
Answer: The important areas of application of statistics are:
- The State
- Business Management and Industry
- Social and Natural Sciences
- Biology and Medicine