Here is the Daily Show’s John Hodgman explaining how the Dismal Science got its name:
Jon Stewart: Uh, the way you’ve explained the tax cuts doesn’t really seem fair.
John Hodgman: Fairness isn’t really the point. They don’t call economics the dismal science because it’s fair.
JS: Well, I suppose not.
JH: No, no, they call it that after Sir Eustice Dismal. The 18th century English economist who proposed making smokestacks out of children.
JS: I uh, I actually never knew that.
JH: Yes, it was a very interesting proposal but ultimately flawed. I mean if you make the smokestacks out of children who will you force to clean them?…
JH: Yes, it’s referred to as Dismal’s paradox.
The real story which, contrary to popular opinion has nothing to do with Malthus, can be found here.