As one who actively participates in this parlor game, I disagree with the premise. Prior to writing proposals, I would have thought writing proposals was a huge waste of time and effort. However, we have a saying that no good idea goes to waste. When writing, you have to be clear and concise and your idea has to be good to get funding. If you don't get funded, you usually get good, useful feedback. You get better, your ideas get better, and the person reviewing them has learned what many scientist in the field are proposing as the best new directions for research. These are all valuable uses of time that might otherwise be spent learning how to make your ideas better, how to communicate them better, and how better understand what is going on in the field. In other words, things that you would be doing anyway.

I think the biggest problem facing science right now is the scale at which it is occurring. My field does not have this problem, but I can't imagine what it's like trying to stay on top of the literature in e.g. medical sciences. Paper writing and peer review work at much smaller scales - there are order hundreds scientist in my field and I think it's functioning just fine. For fields with thousands and 10s of thousands of active researchers, I think there needs to be a different way to vet and organize information. I don't know what that is exactly but it might look something like twitter (can't believe I'm writing this!). On second thought, maybe it looks more like HN!

The misalignment of incentives can be problematic as well, but arguably, not the biggest problem.