Common- and special-causes are the two distinct origins of variation, in a process that features in the statistical thinking and methods of Walter A. Shewhart and W. Edwards Deming. However, it can be argued that they were recognised and discussed as early as 1703 by Gottfried Leibniz and are particularly important in the thinking of economists Frank Knight, John Maynard Keynes and G. L. S. Shackle. Several alternative names have been used over the years. Process (lat. ... Statistics is a type of data analysis which includes the planning, summarizing, and interpreting of observations of a system possibly followed by predicting or forecasting of future events based on a mathematical model of the system being observed. ... Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... William Edwards Deming, Ph. ... Events February 2 - Earthquake in Aquila, Italy February 4 - In Japan, the 47 samurai commit seppuku (ritual suicide) February 14 - Earthquake in Norcia, Italy April 21 - Company of Quenching of Fire (ie. ... Gottfried Wilhelm von Leibniz (also Leibnitz) (Leipzig July 1 (June 21 O.S.), 1646 – November 14, 1716 in Hannover) was a Germanized Sorbian philosopher, scientist, mathematician, diplomat, librarian, and lawyer. ... An economist is someone who studies Economics. ... Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an important economist in the first half of the twentieth century. ... John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ...

Origins and concepts

In 1703, Jacob Bernoulli wrote to Gottfried Leibniz to discuss their shared interest in applying mathematics and probability to games of chance. Bernoulli speculated whether it would be possible to gather mortality data from gravestones and thereby calculate, by their existing practice, the probability of a man currently aged 20 years outliving a man aged 60 years. Leibniz replied that he doubted this was possible as: Events February 2 - Earthquake in Aquila, Italy February 4 - In Japan, the 47 samurai commit seppuku (ritual suicide) February 14 - Earthquake in Norcia, Italy April 21 - Company of Quenching of Fire (ie. ... Jakob Bernoulli. ... Gottfried Wilhelm von Leibniz (also Leibnitz) (Leipzig July 1 (June 21 O.S.), 1646 – November 14, 1716 in Hannover) was a Germanized Sorbian philosopher, scientist, mathematician, diplomat, librarian, and lawyer. ... Wikibooks Wikiversity has more about this subject: School of Mathematics Wikiquote has a collection of quotations related to: Mathematics Look up Mathematics on Wiktionary, the free dictionary Wikimedia Commons has media related to: Mathematics Bogomolny, Alexander: Interactive Mathematics Miscellany and Puzzles. ... The word probability derives from the Latin probare (to prove, or to test). ... Jakob Bernoulli. ... The word probability derives from the Latin probare (to prove, or to test). ... Gottfried Wilhelm von Leibniz (also Leibnitz) (Leipzig July 1 (June 21 O.S.), 1646 – November 14, 1716 in Hannover) was a Germanized Sorbian philosopher, scientist, mathematician, diplomat, librarian, and lawyer. ...

Nature has established patterns originating in the return of events but only for the most part. New illnesses flood the human race, so that no matter how many experiments you have done on corpses, you have not thereby imposed a limit on the nature of events so that in the future they could not vary.

This captures the central idea that some variation is predictable, at least approximately in frequency. This common-cause variation is evident from the experience base. However, new, unanticipated, emergent or previously neglected phenomena (e.g. "new diseases") result in variation outside the historical experience base. Shewhart and Deming argued that such special-cause variation is fundamentally unpredictable in frequency of occurrence or in severity. Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... William Edwards Deming, Ph. ...

John Maynard Keynes emphasised the importance of special-cause variation when he wrote: John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ...

By “uncertain” knowledge … I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty ... The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention … About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know!

Definitions

Common-cause variation

Common-cause variation is characterised by:

• Phenomena constantly active within the system;
• Variation predictable probabilistically;
• Irregular variation within an historical experience base; and
• Lack of significance in individual high or low values.

The outcomes of a roulette wheel are a good example of common-cause variation. Common-cause variation is the noise within the system. The word probability derives from the Latin probare (to prove, or to test). ... Roulette is a casino and gambling game (Roulette is a French word meaning small wheel). A croupier turns a round roulette wheel which has 37 or 38 separately numbered pockets in which a ball must land. ...

Walter A. Shewhart originally used the term chance-cause. The term common-cause was coined by Harry Alpert in 1947. Shewhart called a process that features only common-cause variation as being in statistical control. This term is deprecated by some modern statisticians who prefer the phrase stable and predictable. Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... 1947 was a common year starting on Wednesday (link will take you to calendar). ... Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... Statistical Process Control, or SPC is a method for achieving quality control in manufacturing processes. ...

Special-cause variation

Special-cause variation is characterised by:

• New, unanticipated, emergent or previously neglected phenomena within the system;
• Variation inherently unpredictable, even probabilistically;
• Variation outside the historical experience base; and
• Evidence of some inherent change in the system or our knowledge of it.

Special-cause variation always arrives as a surprise. It is the signal within a system. The word probability derives from the Latin probare (to prove, or to test). ...

Walter A. Shewhart originally used the term assignable-cause. The term special-cause was coined by W. Edwards Deming. Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... William Edwards Deming, Ph. ...

Importance to economics

John Maynard Keynes and Frank Knight both discussed the inherent unpredictability of economic systems in their work and used it to criticise the mathematical approach to economics, in terms of expected utility, developed by Ludwig von Mises and others. Keynes in particular argued that economic systems did not automatically tend to the equilibrium of full employment owing to their agents' inability to predict the future. As he remarked in The General Theory of Employment, Interest and Money: John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ... Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an important economist in the first half of the twentieth century. ... U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau of Economic Research (USA) - Economics material from the organization... In economics, utility is a measure of the happiness or satisfaction gained from a good or service. ... Ludwig Heinrich Edler von Mises (September 29, 1881 - October 10, 1973), was a notable economist and social philosopher. ... John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ...

… as living and moving beings, we are forced to act … [even when] our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation.

Keynes's thinking was at odds with the classical liberalism of the Austrian school of economists, but G. L. S. Shackle recognised the importance of Keynes's insight and sought to formalise it within a free-market philosophy. John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ... Classical liberalism is a political and economic philosophy. ... The Austrian School is a school of economic thought that rejects opposing economists reliance on methods used in natural science for the study of human action, and instead bases its formalism of economics on relationships through logic or introspection called praxeology. ... An economist is someone who studies Economics. ... John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ... A free market is one in which buyers and sellers make mutually voluntary exchanges at a price agreed upon by both (see market economy). ...

Importance to industrial management

Harry Alpert observed:

A riot occurs in a certain prison. Officials and sociologists turn out a detailed report about the prison, with a full explanation of why and how it happened here, ignoring the fact that the causes were common to a majority of prisons, and that the riot could have happened anywhere.

The quote recognises that there is a temptation to react to an extreme outcome and to see it as significant, even where its causes are common to many situations and the distinctive circumstances surrounding its occurrence, the results of mere chance. Such behaviour has many implications within management, often leading to interventions in processes that merely increase the level of variation and frequency of undesirable outcomes.

Deming and Shewhart both advocated the control chart as a means of managing a business process in an economically efficient manner. William Edwards Deming, Ph. ... Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... It has been suggested that this article or section be merged with common cause and special cause. ... Process (lat. ...

Importance to statistics

Deming and Shewhart

Within the frequency probability framework, there is no process whereby a probability can be attached to the future occurrence of special cause . However the Bayesian approach does allow such a probability to be specified. The existence of special-cause variation led Keynes and Deming to an interest in bayesian probability but no formal synthesis has ever been forthcoming. Most statisticians of the Shewhart-Deming school take the view that special causes are not embedded in either experience or in current thinking (that's why they come as a surprise) so that any subjective probability is doomed to be hopelessly badly calibrated in practice. Statistical regularity has motivated the development of the relative frequency concept of probability. ... The word probability derives from the Latin probare (to prove, or to test). ... Bayesianism is the philosophical tenet that the mathematical theory of probability applies to the degree of plausibility of a statement. ... The word probability derives from the Latin probare (to prove, or to test). ... John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ... William Edwards Deming, Ph. ... Bayesianism is the philosophical tenet that the mathematical theory of probability applies to the degree of plausibility of a statement. ...

It is immediately apparent from the Leibniz quote above that there are implications for sampling. Deming observed that in any forecasting activity, the population is that of future events while the sampling frame is, inevitably, some subset of historical events. Deming held that the disjoint nature of population and sampling frame was inherently problematic once the existence of special-cause variation was admitted, rejecting the general use of probability and conventional statistics in such situations. He articulated the difficulty as the distinction between enumerative and analytic studies. Gottfried Wilhelm von Leibniz (also Leibnitz) (Leipzig July 1 (June 21 O.S.), 1646 – November 14, 1716 in Hannover) was a Germanized Sorbian philosopher, scientist, mathematician, diplomat, librarian, and lawyer. ... Sampling is that part of statistical practice concerned with the selection of individual observations intended to yield some knowledge about a population of concern, especially for the purposes of statistical inference. ... William Edwards Deming, Ph. ... Sampling Frame: The source from which a sample is drawn. ... A is a subset of B, and B is a superset of A. In mathematics, especially in set theory, a set A is a subset of a set B, if A is contained inside B. Every set is a subset of itself. ... William Edwards Deming, Ph. ... Sampling Frame: The source from which a sample is drawn. ... The word probability derives from the Latin probare (to prove, or to test). ... Statistics is a type of data analysis which includes the planning, summarizing, and interpreting of observations of a system possibly followed by predicting or forecasting of future events based on a mathematical model of the system being observed. ...

Shewhart argued that, as processes subject to special-cause variation were inherently unpredictable, the usual techniques of probability could not be used to separate special- from common-cause variation. He developed the control chart as a statistical heuristic to distinguish the two types of variation. Both Deming and Shewhart advocated the control chart as a means of assessing a process's state of statistical control and as a foundation for forecasting. Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... It has been suggested that this article or section be merged with common cause and special cause. ... William Edwards Deming, Ph. ... Walter Andrew Shewhart (March 18, 1891 - March 11, 1967) was a physicist, engineer and statistician, sometimes known as the father of statistical quality control. ... It has been suggested that this article or section be merged with common cause and special cause. ... Statistical Process Control, or SPC is a method for achieving quality control in manufacturing processes. ...

Keynes

Keynes identified three domains of probability: John Maynard Keynes, 1st Baron Keynes of Tilton (pronounced kānz / kAnze), ) (June 5, 1883 – April 21, 1946) was an English economist, whose ideas had a major impact on modern economic and political theory as well as on Franklin D. Roosevelts New Deal. ... The word probability derives from the Latin probare (to prove, or to test). ...

• Frequency probability;
• Subjective or Bayesian probability; and
• Events lying outside the possibility of any description in terms of probability (special causes)

- and sought to base a probability theory thereon. Statistical regularity has motivated the development of the relative frequency concept of probability. ... Bayesianism is the philosophical tenet that the mathematical theory of probability applies to the degree of plausibility of a statement. ... The word probability derives from the Latin probare (to prove, or to test). ... Probability theory is the mathematical study of probability. ...

Bibliography

• Deming, W E (1975) On probability as a basis for action, The American Statistician, 29(4), pp146-152
• Deming, W E (1982) Out of the Crisis: Quality, Productivity and Competitive Position ISBN 0521305535
• Keynes, J M (1921) A Treatise on Probability, ISBN 0333107330
• Keynes, J M (1936) The General Theory of Employment, Interest and Money ISBN 1573921394
• Knight, F H (1921) Risk, Uncertainty and Profit ISBN 1587981262
• Shackle, G L S (1972) Epistemics and Economics: A Critique of Economic Doctrines ISBN 1560005580
• Shewhart, W A (1931) Economic Control of Quality of Manufactured Product ISBN 73890760
• Shewhart, W A (1939) Statistical Method from the Viewpoint of Quality Control ISBN 0486652327
• Wheeler, D J & Chambers, D S (1992) Understanding Statistical Process Control ISBN 0945320132