Final answer:
Mr. Gradgrind understands that the utilitarian education he advocated for failed to provide Louisa with essential emotional experiences, leaving her emotionally stunted.
Step-by-step explanation:
By the end of Hard Times, Mr. Gradgrind realizes that Louisa's education, which is rooted in utilitarian philosophy, deprived her of necessary emotional experiences. Instead of fostering her well-being as an individual, it stifled her ability to connect with her own emotions and with others, leading to a dry and unsatisfied existence. This realization shows a significant transformation in Gradgrind's character and highlights the novel's critical stance on a purely utilitarian approach to education.