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Methods of statistical interference including estimation and modem filter theory are finding ever-increasing application in electrical engineering problems. Two problems which occur when methods of modem estimation theory are applied to a physical problem are the choice of prior statistics and the choice of a mathematical model for the system. This paper provides a fundamental and tutorial discussion of the role of error analysis, sensitivity, and prior statistics in classical point estimation. Thus, it provides the framework for study and research into varied aspects of this problem in more difficult and realistic situations.