INTRODUCTION TO PROBABILITY AND STATISTICSECON 3130Week 1, Lecture 1IntroductionAugust 23, 20171What are your chances of finding a job when you graduate?2What are your chances of finding a job when you graduate?Idea 1: Figure out what fraction of last year’s graduates got jobs.3What are your chances of finding a job when you graduate?Idea 1: Figure out what fraction of last year’s graduates got jobs.Idea 2: Use a larger sample that includes graduates from the last several years4What are your chances of finding a job when you graduate?Idea 1: Figure out what fraction of last year’s graduates got jobs.Idea 2: Use a larger sample that includes graduates from the last several yearsIdea 3: Use data on observed characteristics (like major, GPA, and work experience) to see how these predict getting jobs5Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?6Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?7Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?8Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?• How important are good institutions to economic growth?9Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?• How important are good institutions to economic growth?• How will healthcare reform affect small businesses?10Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?• How important are good institutions to economic growth?• How will healthcare reform affect small businesses?1-A. Understand the math behind these methods11Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?• How important are good institutions to economic growth?• How will healthcare reform affect small businesses?1-A. Understand the math behind these methods1-B. Understand the intuition12Course Goals1. Learn methods that let you answer real questions with real data; e.g.,• What are your chances of finding a job when you graduate?• How do price, season, or advertising affect sales of a particular product?• How important are good institutions to economic growth?• How will healthcare reform affect small businesses?1-A. Understand the math behind these methods1-B. Understand the intuition1-C. Know how how to apply these methods with realdata analysis software (Stata)13What topics will we cover?1. Probability and Univariate Distributions (Weeks 1-5)• Understanding and quantifying uncertain events• Discrete and continuous random variables• Expectations and moment-generating functions14What topics will we cover?1. Probability and Univariate Distributions (Weeks 1-5)• Understanding and quantifying uncertain events• Discrete and continuous random variables• Expectations and moment-generating functions2. Multivariate Distributions and Estimation (Weeks 6-10)• Correlation, covariance, and functions of random variables• The Central Limit Theorem• Estimating parameters of populations from samples• Quantifying uncertainty about estimates15What topics will we cover?1. Probability and Univariate Distributions (Weeks 1-5)• Understanding and quantifying uncertain events• Discrete and continuous random variables• Expectations and moment-generating functions2. Multivariate Distributions and Estimation (Weeks 6-10)• Correlation, covariance, and functions of random variables• The Central Limit Theorem• Estimating parameters of populations from samples• Quantifying uncertainty about estimates3. Confidence Intervals and Hypothesis Testing (Weeks 11-15)• Confidence intervals• Parametric and nonparametric tests• Statistical power of a test16Why is this class important?Two main reasons: 1. Uncertainty is pervasive. Most important questions in economics (and many other fields) involve uncertainty. 2. Intuition is elusive. Most people have imprecise intuition about uncertain phenomena. 17Why is this class important?Two main reasons: 1. Uncertainty is pervasive. Most important questions in economics (and many other fields) involve uncertainty. 2. Intuition is elusive. Most people have imprecise intuition about uncertain phenomena. So: • This is one reason people find probability/statistics/econometrics to be hard subjects. 18Why is this class important?Two main reasons: 1. Uncertainty is pervasive. Most important questions in economics (and many other fields) involve uncertainty. 2. Intuition is elusive. Most people have imprecise intuition about uncertain phenomena. So: • This is one reason people find probability/statistics/econometrics to be hard subjects. But: • This also is why the skills learned in this course are valuable.19One more reason: Zettabytes of dataWith huge amounts of data newly available in every corner of society, the world is becoming more data driven. • Super Crunchers: Why Thinking-by-Numbers is the New Way to Be Smart (Ian Ayres, 2007)• Numbers Rule Your World (Kaiser Fung, 2010)201 zettabyte =a billion terabytesShould you take this class?21Should you take this class?• Have you taken a stats class before?• You might get more out of Econ 3120 or Econ 314022Should you take this class?• Have you taken a stats class before?• You might get more out of Econ 3120 or Econ 3140• Do you want to focus primarily on the intuition behind the methods?• Take Econ 311023Should you take this class?• Have you taken a stats class before?• You might get more out of Econ 3120 or Econ 3140• Do you want to focus primarily on the