This mis-characterizes the Economist's wonder at price mechanisms - as though this one characteristic in a vacuum should be a shining example of the "invisible hand" (subtext mine).

The key market assumption that is missing that would make this a wholly positive pricing activity, is that the marginally increased demand also comes with a marginally increased supply at a marginally higher cost, which it doesn't in these cases. The supply market does not expand in order to cover more customers in most cases, with everyone paying a slight penalty for the transaction/logistical cost, all it does is take a saturated supply market and price out the lower tier.

So if Uber was able to dispatch MORE drivers for a slightly higher cost at surge times (arguably easier with Uber than with traditional taxi companies), that would actually be closer to the Pareto efficiency that economists like. Perhaps I am wrong but it doesn't look like that is what happens in the case of Uber.