Statistical decision making theory,

Introduction

S.S. RAWAT

Meaning of statistics

1) STATISTICS MAY BE CALLED THE SCIENCE OF COUNTING 2) STATISTICS MAY RIGHTLY BE CALLED THE SCIENCE OF

AVERAGE 3) STATISTICS MAY BE DEFINED AS THE SCIENCE OF COLLECTION, PRESENTATION , ANALYSIS AND INTERPRETATION OF NUMERICAL DATA 4) STATISTICS IS METHOD OF DECISION MAKING IN FACE OF UNCERTAINLY ON THE BASIS OF NUMERICAL DATA AND CALCULATED RISKS. 5) STATISTICS IS THE SCIENCE OF ESTIMATES AND PROBABILITY

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Is statistics a science or an art or both ?

STATISTICS IS BOTH A SCIENCE AND AN ART OF HANDLING AGGREGATE OF FACTSOBSERVATION ,RECORDING , CLASSIFYING AND OTHERWISE SYSTEMATICALLY TREATING THEM .

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Functions of statistics
a) Comparison. b)Formulation and testing of hypotheses c) Prediction d) Formulation of suitable policies. e) Preciseness and definiteness.

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LIMITATIIONS OF STATISTICS

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Limitation of statistics
1) STATISTICS DOES NOT DEAL WITH INDIVIDUAL

FIGURES. 2) STATISTICS DOES NOT STUDY QUALITATIVE DATA. 3) STATISTICAL LAWS ARE NOT EXACT. 4) STATISTICS CAN BE MISUSED 5) STATISTICAL INTERPRETATIONS REQUIRE A HIGH DEGREE OF SKILL AND UNDERSTANDING OF THE SUBJECT
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Statistical Decision Making

ANALYSTS MUST OFTEN MAKE

DECISIONS ABOUT SOME CONDITION IN THE REAL WORLD.

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 CASE : Assume that you have finished your MA in policy studies and have been hired as the environmental affairs officer for the city of Dheradun.

You must make the following assessment:

Does the water supply in Dheradun comply with safe drinking water standards?
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Hypothesis Testing

We can decide the facility is In Compliance.

or We can decide the facility is in Violation. (not in compliance)

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If we decide: The facility is in compliance and it is.

or
We decide the facility is in violation and it is. Then we are fine. We have made a correct decision But sometimes No, make that often were not correct. We make mistakes.

Statistics gives us some rules to reduce the likelihood of making these mistakes

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Example of a statistical test

In order to test the facilities water we will collect several bottles of water at different times. We take this sample

(Do not be confused by the chemistry. Each bottle of water is a sample to the chemist, while all of the separate bottles of water are the sample to the statistician.)
And we calculate the average amount of the pollutant e.g. lead.
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The average of the samples is thus

Our hypothesis is thus

ppb (the standard for lead) Because we will say that the standard actually refers to a population distribution with a mean equal to the standard, we can restate this is conventional statistical terms
For info on EPA standards

Hypotheses
The hypothesis is:

The facility is in violation.

Sometimes referred to as The alternate hypothesis.

The null hypothesis is:

The facility is in compliance. In this instance, you want to be able to reject the alternate hypothesis, or more properly, fail to reject the null hypothesis.

Hypothesis? pothesis?