The Role of Statistics in Decision Making

At some point in your life, you might be encountering situations that are difficult to deal with. How will you be able to make informed and objective decisions? This article describes how statistics can help you out of your misery.

Do you have difficulty in making decisions about personal issues and concerns? Chances are, you are one of those who have decision making woes especially on personal matters where you are emotionally involved. How can this be resolved?

The use of statistical tools may help you on this situation. It will help you reduce the uncertainty associated with decision making that can affect your way of life. It reduces the guesswork associated with decision making.

Below is an example of a personal decision making scenario that demonstrates the role of statistics in decision making.

The Role of Statistics in Decision Making

As a practicing statistician for many years, I find the experience of using some tools of statistics like the t-test rather satisfying, especially if I am able to use use it to aid me in decision making. A simple addition of advantages and disadvantages of a decision may be sufficient in some circumstances (see my post related to this simple decision making approach entitled Decision Making Technique for Indecisive People), but in some in some instances, more rigorous analysis of statistical data can provide useful information. Statistics can also verify whether the decision made was, after all, a good one.

Example Decision-Making Situation Aided by Statistics

One concrete, personal experience that demonstrates the role of statistics in decision making happened several years ago. That decision dilemma occurred in 2005. I decided to buy a vehicle to meet a personal and professional need.

I was then very much concerned about the fuel consumption of my second, probably more accurately, third-hand customized owner-type Toyota jeep I bought from a colleague. The jeep guzzles up about 1 liter of gasoline for barely 4 or 5 kilometers of road covered! I thought that this is not at all good to my pocket, so I decided to bring the jeep to the automotive repair shop.driving a car

I requested the mechanic for a major engine overhaul, where the engine block has to be rebored to make way for a cylindrical metal sleeve. The metal sleeve narrows the opening where the piston is fired up and down by the series of explosions that occur in the combustion chamber.

But these engine-related jargon can confound many people unfamiliar with these terms. Simply put, the whole tune up process aimed to eliminate loose compression of fuel in the engine that leads to a very low distance to fuel ratio.

Curiosity struck me, whether my decision to spend for tune up really mattered. Did the number of kilometers covered by the old jeep significantly improve after the tune up?

Armed with a knowledge of the t-test, I sought to find out the answer to this question using the monthly monitoring data I gathered on the total number of kilometers travelled for one gas up; where the number of liters of gasoline is reflected in the receipt I religiously collected each time I visit the gasoline station.

I encoded these data in MS Excel, anticipating the t-test computation I will make. I intend to compare the gasoline consumption of my jeepney before and after the tune up.

I logged the gasoline consumption of my jeep for several months after the tune up. I then used this data in comparing the jeep’s performance, before and after the tune up, waiting until I have gathered data for at least 10 gas fill ups.

Result of the t-test Analysis

So, did I find a significant difference in gasoline consumption before and after the tune up? The answer is “Yes”. Indeed the kilometer covered per liter significantly increased almost twice the previous gasoline consumption. It can now run at 8 or 9 kilometers per liter of gasoline. That’s definitely a better performance than the previous 4 kilometers of road travelled per liter of gasoline. My investment somehow paid off.

This information helped me decide whether I should keep the jeep after having it tuned up in the automotive repair shop. I actually expected that the jeep should cover more than 8 or 9 kilometers because new vehicles run this distance with the air conditioner on. And the jeep does not have any air conditioning in it. When the climate is hot, it’s hot inside the jeep and when the surrounding environment is cool, well, of course the jeep’s cool too.

My Decision After the t-test Analysis

I decided to give the jeep up, sold it and bought a newer, diesel-powered Mitsubishi pick up truck that runs at 11 kilometers per liter of diesel with the air conditioning on. That was five years ago, and my pick up truck still runs like new as I make sure the engine oil is changed regularly to keep the parts inside working smoothly, thus efficiently.

Maybe I should subject it again to t-test in the coming months to see if I still have to keep it or consider buying a new one. Such is the role of statistics in decision making.

See how simply adding numbers can help you decide in my Ezinearticles post titled How to Improve Your Decision Making Skills.

© 2012 December 2 P. A. Regoniel

Leave a Reply