Introduction to Statistics for Economics

Every person, family and country has unlimited wants but only limited resources to satisfy them. Economics is the study of how people use these scarce resources to satisfy their wants — in particular, how they carry out three activities: consumption (using goods and services to satisfy wants), production (making goods and services), and distribution (how the income from production is shared as rent, wages, interest and profit).

A famous definition by Alfred Marshall says economics is "a study of mankind in the ordinary business of life." Lionel Robbins defined it as the science that studies human behaviour as a relationship between ends (wants) and scarce means that have alternative uses.

To study these activities seriously, economists need facts and figures (data) — for example, how much families earn and spend, how prices change, how many people are unemployed, or how much a country produces. This is where statistics comes in. Statistics gives economists the numbers they need to describe economic problems (like poverty or inflation), compare situations across time and place, and test whether their theories actually hold true. In short, economics asks the questions, and statistics helps find the answers using real data. That is why "Statistics for Economics" is the first thing a student of economics learns.

The word statistics is used in two senses. In the plural sense it means numerical facts or data — for example, the statistics of population, prices or production. In the singular sense it means the science or method of collecting, organising, presenting, analysing and interpreting numerical data. So statistics is both the data and the method of handling data.

Statistics performs several important functions:

• It presents facts in a definite, numerical form (more precise than vague words like "many" or "few").
• It simplifies complex data into averages, totals and ratios that are easy to understand.
• It helps in comparison of figures across time, regions or groups.
• It helps in studying relationships (e.g. between price and demand).
• It helps in forecasting and in formulating policies and testing theories.

The scope of statistics is very wide — it is used in economics, business, government, science, sports and everyday life. A statistical investigation (the process of a statistical study) moves through stages: collection of data → organisation → presentation → analysis → interpretation. These stages are the spine of the whole Statistics course you are about to study.

Statistics is powerful, but it is not magic — it has clear limitations that an honest student must respect:

• Statistics studies only quantitative facts (things that can be measured in numbers). It cannot directly study qualitative things like honesty, beauty or intelligence.
• Statistics studies aggregates (groups), not individuals. A single figure has little statistical meaning on its own.
• Statistical results are true only on average, not for every single case. (The average family may have 2 children, yet no family has exactly 2.)
• Statistics can be misused, so its results must be handled by people who understand it.

Because figures can be twisted, many people feel a distrust of statistics — captured in the famous saying often quoted as "there are lies, damned lies, and statistics." This distrust usually arises not because statistics is wrong, but because of its misuse: choosing only the data that suits an argument, using a wrong average, drawing graphs to exaggerate, or comparing things that are not really comparable. For example, a company may show only the years its sales rose and hide the years they fell.

The lesson is that statistics is a tool — useful and honest when used correctly by knowledgeable people, but capable of misleading when misused. Good economists therefore state their sources, use the right methods, and interpret figures carefully and honestly.