Question

Statistical methods are no substitute for common sense.' explain with example.

Answer 1

This is true that Statistical methods are no substitute for common sense. Statistical data should not be believed blindly as it can be misinterpreted or misused. The statistical data may involve personal bias or may undergone manipulations.

Thus, the common sense must be used while applying statistical methods.

Oftentimes in economics and other areas, statistical methods are used to approximate values or intervals.

Despite the usefulness of these methods, there are often sources of error that affect the statistical results. In these cases, we have to use common sense to realize that the statistics are not completely accurate.

The primary source of problems with statistics in economics is that in economics we rarely know all the factors affecting an outcome.

If, for example, we are attempting to reach a conclusion on the outcome of a tax increase, we can most likely look at the overall numbers and--using common sense--eyeball an approximation of the result. However, if we plug our knowledge into a statistical formula, but forgot or don't know about a specific factor (let's say, we forget to include tax-free imports in the imports section), the statistics method may give us an answer that is incorrect or unrealistic.

So, if faced with a statistic like "90% of all United States citizens are able to find jobs that they feel are well-suited their skills," we have to have the ability to realize that there is something wrong with the data or the statistical method used to generate this statistic.

hope it helps..