Thank you for the comments!
It is possible that my proposal (of a "no-proposal" approach to funding) will not work for socially directed research like drug development, but that is not necessarily true. Suppose you were in a committee making funding decisions on cancer and you receive a grant application without a proposal. Of course it would have to be in the general area of cancer, but does not say much else -- definitely not what they are planning to find and how. Then you look at the work done by the PI's and collaborators for the last 5 years -- if they have done promising work, they are likely to get more, while if they have done more of the same they are likely to get less.
Basically, if you wonder if this process will work for some particular type of research, put yourself in the place of the funding committee. What would you ask for in the grant proposal? Does it really matter to you that you know exactly what they are looking for? Should it matter? Can you trust them that they are working really hard to find solutions of genuine problems? Of course, you know the field and you know the background of these researchers. I think genuine researchers should be trusted with the money, They are more likely to surprise us than those who can describe every step of their research, because the latter are likely to be totally mechanical in their approach.