Statistics

Limitations Of Statistics – Business Statistics

LIMITATIONS OF STATISTICS – In modern times, Statistics has come to occupy an important place. However, it has certain limitations. While making use of statistical methods, these limitations are kept in view. In the words of Newshome, “Statistics must be regarded as an instrument of research of great value but barring severe limitations which are not possible to overcome”. The main limitations of statistics are as follows:

(1) Study of Numerical Facts only: Statistics studies only such facts as can be expressed in numerical terms. It does not study qualitative phenomena, like honesty, friendship, wisdom, health, patriotism, justice, eto.

(2) Study of Aggregates only: Statistics studies only the aggregates of quantitative facts. It does not study any particular unit. For example, if the income of Ram is 2000 per month, it has no relevance in statistics. But if the income of Ram is 2000 p.m., that of Sohan is 3000 p.m., and that of Shyam is 4000 p.m., then these aggregates will form part of study of statistics. Their average income will work out to be 3000. This average income will lead to the conclusion that all the three persons belong to middle class. Such a conclusion would not have been possible from the study of Ram’s income alone.

(3) Not the only Method: Statistical method is not the only method to study. Many a time this method does not suggest the best solution of each problem. The conclusions drawn on the basis of statistics should be verified with the help of the conclusion drawn with the help of qualitative methods.

(4) Homogeneity of Data: Quantitative data must be uniform and homogeneous. To compare the data, it is essential that whatever statistics are collected, the same must be uniform in quality Data of different qualities and kinds cannot be compared. For example, production of foodgrains cannot be compared with the production of cloth. It is because cloth is measured in metres and foodgrains in tonnes. However, it is possible to compare their value instead of comparing the volume of their production.

(5) Results are true only on an Average: Laws of statistics are true only on an average. They express tendencies. Unlike the laws of physical science or chemistry, they are not absolutely true. They are not valid always and under all conditions. For instance, if it is said that per capita income in India is 6000 per annum, it does not mean that the income of each and every Indian is 6000 per annum. Some may have more and some may have less than it. It is true only on an average.

(6) Without Reference Results may Prove Wrong: In order to understand the conclusions very well, it is necessary that the circumstances and conditions under which these conclusions have been drawn are also studied, otherwise they may prove wrong. For example, in the business of cloth and paper, profits earned during three years may be 1000, 2000 and 3000 respectively. Thus the average profit in both the businesses comes to 2000 per annum. It may lead to the conclusion that both the businesses have similar economic position, but it is not true. If studied in proper perspective, we will find that whereas cloth-business is making progress, paper-business is on the decline.

(7) Can be used only by Experts: Statistics can be used only by those persons who have special knowledge of statistical methods. Those who are ignorant about these methods cannot make use of it. It can, therefore, be said that data in the hands of an unqualified person is like a medicine in the hands of a quack who may abuse it out of ignorance leading to dangerous results. In the words of Yule and Kendall, “Statistical Methods are most dangerous tools in the hands of an inexpert”.

(8) Misuse of Statistics is Possible: Misuse of statistics is possible. It may prove true what actually is not true. It is usually said, “Statistics are like clay of which you can make a god or devil, as you please”. Misuse of statistics is, therefore, its greatest misuse.

(9) Only Means and not a Solution: Some scholars are of the opinion that statistics are only a means in the solution of any problem. It is not a solution to the problem. To check the misuse of statistics, conclusions should be drawn impartially and without any selfish interest. Otherwise, statistics may not become a proper means for the solution of any problem In short, while making use of Statistics, its limitations as discussed above, must always be kept in mind.

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