Doctors referred patients with osteoarthritis to surgeons for something called knee arthroscopy. They did this for years. Doctors, and surgeons, thought it was doing good. They were not dicks. They were not charlatans. They were not quacks. They were not idiots.
They just didn't have enough evidence, and persuaded themselves that the evidence they had was better quality than it actually was. The surgery isn't outlandish; it has a plausible mechanism of action; patients report good results afterwards. And the reason best standard research wasn't done is because there's a bunch of stuff we do that we've been doing for a long time and are only just now getting around to properly studying.
So, when a placebo-controlled blinded study was done we discover that knee arthroscopy probably doesn't do anything more than placebo for osteoarthritis.
Patients demanding placebo like vitamin shots or antibiotics is an old problem (or technique, depending on how you look at it). For that matter, many doctors are regularly prescribing people stimulants or opioids because patients are asking for them - instead of turning down their money and/or making them unhappy.
I agree with you and like the example, but I wanted to provide feedback that this example is confusing in its relation to the current topic.
We know that we should only trust double-blind controlled randomised trials. This surgery hadn't had that trial, thus it shouldn't have been trusted, yet it was. And the reasons it was trusted are just biases.