I think the point was that having smart people participate is wasting their time when they could be doing something more productive, not who is losing. Like for instance work on robotic arms so we can all have a household robot to do the house chores.
Medical research on non-life-threatening things is still creating value for people with less-than-fatal problems.
Physicists working on physics research might be a problem if those physicists could just divert money elsewhere in the economy into their own research programs. As it is, there's a complex system of controls so that public research money is generally used for some reasonably good purpose.
