Thomas Carlyle, a 19th-century Scottish essayist, coined the phrase “the dismal science.” Carlyle was reacting to grim predictions made by the classical economists David Ricardo (1772-1823) and Thomas Malthus (1766-1834). Ricardo posited an “iron law of wages” whereby a constant oversupply of laborers would mercilessly keep wages at a bare subsistence level. Malthus became the intellectual forbear of today’s gloom-and-doom environmentalists by asserting that the human population tended to increase geometrically while the means of sustenance would grow only arithmetically. Echoing Ricardo’s “iron law,” Malthus’ grim mathematical theory predicted that workers would be trapped forever in lives of poverty.

Yes, those theories were dismal. Thankfully, though, they were utterly demolished by subsequent events. In country after country, populations and standards of living have risen by multiples since the days of Ricardo and Malthus. The classical economists failed to foresee such future phenomena as widespread middle-class affluence and people being defined as “poor” despite having cars, air conditioners, and cell phones (not to mention indoor plumbing, a reliable supply of clean water, and other conveniences that most people lacked in 1800).

Let’s not be too harsh in judging Ricardo and Malthus for their lack of foresight. Who, in 1800, could have foreseen the rise of capitalism that made possible the marvelous growth of productivity and wealth that would transform the world over the next two centuries? To do so would have been to envision a state of affairs without historical precedent, entirely outside their scope of experience or knowledge.

What was “dismal” to Carlyle was not economic science, but economic error. Would it be fair to dub aeronautics a “dismal science” on the basis of the many failed attempts at manned flight in the pre-Wright brothers era?

The fact is that “economics,” as a distinct science, was still in its embryonic stage when Carlyle wrote. Economics was only just beginning to emerge as a distinct field of study, and there were a few “economists.” Adam Smith was a professor of moral philosophy. Ricardo was a businessman, investor, and politician. Malthus was a preacher. The first chair in “political economy” (notice: not even “economics” yet) wasn’t established until 1825 at Oxford University.

The classical economists contributed greatly to our understanding of markets, the coordinating function of prices (the “invisible hand”), the division of labor, the need for freedom, and a very light hand for government—but they still hadn’t discovered the foundational principles of economics. They were still in the thrall of such persistent errors as “the labor theory of value.”

“Economics” as a modern science wasn’t “born” until the 1870s, when the neoclassical school emerged as a result of finally figuring out what “value” was. There is no “economic science” without understanding value any more than you can have chemical science without understanding valences or valid arithmetic without zero.

Since Carl Menger’s brilliant discovery and articulation of the “subjective theory of value” in 1871, economic science has flourished, culminating logically in Ludwig von Mises’ general theory of human action, called praxeology. Mises used the science of economics/praxeology to prove a priori that socialism literally could not be viable, and that if one’s goal is a society with rising standards of living, then private property, limited government, and free markets are the necessary means to achieve that goal. In the decades since Mises explained how the world works, the rise of affluence in country after country has confirmed the validity of his theories.

Mises’ economic science has unlocked the secrets of wealth creation. We know which policies work and which are counterproductive. This is spectacularly good news. We now have the economic knowledge to unlock humankind’s potential for eliminating chronic poverty and living and working together in peace and prosperity.

Why, then, is there so much “dismal” news on the economic front today? Because politics has trumped economics. Politicians allied with special interests have ignored and trampled economic principles for their own selfish purposes, thereby retarding the rapid progress toward abundance  that economic science makes available to us.

Since 1995, the Heritage Foundation and Wall Street Journal have published an annual Index of Economic Freedom that assesses 10 political conditions that affect wealth creation. More freedom, as measured by this index, correlates significantly with economic growth. The recently released 2012 edition shows that the United States has fallen to the 10th-freest economy in the world. It is no coincidence that our economic growth has stagnated as economic activity has become less free.

This bad news has a silver lining: We know what we need to do to return to prosperity. Economic science will work in our favor—if only we adhere to its inexorable principles and get the oppressive burden of Big Government and failed political ideologies off our backs.

The dismal clouds on today’s horizon are a toxic mixture of moral corruption, political power-grabbing, and economic error. Economic truth liberates human beings from poverty and stagnation. It is the light that illumines the way. When understood, economics is indeed a cheerful science.