What Makes a Learning Organization?
5:58 pm in Austrian Economics, Education, Entrepreneurship, Management, Montessori by Andrew Humphries
This article on Mises.org (HT: Blake Stephenson) gives an example of how the negative feedback loops inherent in large, centrally directed bureaucracies stifle the use of judgment, local knowledge and initiative.
The article illustrates why the modern state should not be in charge of public education. But I think it also suggests that there are problems that exist in all collective human endeavors that educators, social scientist and entrepreneurs need to try to overcome.
Why can’t we all “learn” from history? Why don’t organizations learn?
Experience teaches. While individuals can clearly be very resilient to recognizing the lessons of their experience, when the consequences of their actions fall squarely on them, it is difficult for them to be completely immune to the implications reality has for their thinking and behavior. Even when we are resistant to such lessons, we are bothered by conscience and failure. Reality provides a kind of ‘control’ for our errors. Yet peoples, governments and organizations seem to be remarkably oblivious to lessons which can be drawn from their past. They repeatedly take the same actions that are detrimental to their purposes. They fail to draw conclusions about the consequences of their collective behaviors and they are slow, if not entirely resistant, to making use of innovations suggested by the experience of their members.
One of the reasons for this is that there is a fundamental epistemological difference between the natural and social sciences. Strictly speaking, experiments cannot be made in the social arena because social structures and relationships are far too complex to isolate one-to-one causal connections between actions and results. In the social realm, every moment is always different from the one before it. History never repeats itself.
For these reasons, irreducible judgment and understanding (verstehen) are essential. We can learn by reading history, however. We can practice exercising our judgment about social dynamics by comparing the considered judgments other individuals have made about particular historical situations in the past. This is practice in developing and considering likely stories about social cause and effect. We can also learn from economics, which tries to uncover the abstract and timeless principles of human actions.
The difference between the learning that occurs in individuals about the immediate effects of their actions and the “learning” of group is that the composite results of the actions of individuals is not immediate and cannot be directly observed. There are unintended and unobserved results of our behaviors that are beyond our conscious recognition and control. Social science studies the results of human action but not of human design. According to Frederick Hayek the “economic problem”–which is to say the fundamental social problem–is the need for agents’ actions to be coordinated to make use of the knowledge (and learning) available to all of those agents separately. In order to make use of dispersed knowledge, we need experimentation, judgment and risk-taking on the part of diverse individuals and some form of feedback that translates individual learning into a form that will tend guide the actions of others.
In the nexus of voluntary exchange (the “market”), the price system and the institutions of private property help to coordinate the knowledge and decisions of all the agents involved. In The Use of Knowledge in Society, The Creative Powers of a Free Civilization and Competition as a Discovery Procedure, Hayek describes how certain institutions tend to make use of fortuitous discoveries and local knowledge for the mutual benefit of agents in that nexus of exchange.
Strictly speaking, groups of individuals do not learn; concomitantly, institutions cannot learn. But social structures can be so constituted that they allow individuals to make use of the knowledge and learning of the other individuals in that group.
Figuring out how to order all of our collective affairs in such a way that optimizes the use of the knowledge of the members of a group who do not possess that knowledge themselves is an exciting task for those who care about learning and progress.



