There's a great Frontline that answers all your questions. Unfortunately it hasn't been digitized.
The problem with trading up the chain, simply put, is that law enforcement only knows what criminals tell them. They are not constructing parallel cases. They're not making the roads safer, they're filling their quota of speeding tickets.
Torture doesn't work for the same reason - if you tell me you'll stop pulling my toenails off if I tell you who gave me the IED, I'll stick with the pliers so long as my source scares me more than you. Which means all I need to do is give up someone who scares me less than you do - and there's no downside to iteratively throwing names out there.
Let's say I've got four buddies - Alex, Bob, Chuck, Dave and Elvis. You've got my phone and you know that I call all of them. You're going to throw me down the forever hole unless I give up my dealer, and you suspect it's Alex, Bob, Chuck, Dave or Elvis. I play cards with Alex. Bob occasionally buys weed from me. Chuck's a single dad who hits me up for money. Dave gets me work sometimes as a bricklayer and also loves to share his collection of child porn. Elvis works for the Zetas cartel.
I'm going to give them up in the following order:
1) Chuck because he's a drag on my bottom line
2) Alex because I lose money when I play him, even if it's usually fun
3) Bob, because I'll miss that income
4) Dave, because I'll really mis that income
Never) Elvis, because I don't want my entire family to end up beheaded on the side of the road outside Amarillo
Presume, for the sake of kindness, that the DEA can rule out Chuck and Alex immediately. They are obviously, visibly harmless. Bob? The DEA is going to squeeze Bob, who will give up his own list that also doesn't include Elvis. Each one of the people on his list will be squeezed until eventually someone is stupid enough to flip a supplier. That supplier is then going to play the exact same fucking game. Elvis is doing just fine, the DEA is chasing their tails, and low-level addicts are suddenly drug kingpins because they're all narcing on each other.
Let's add some financial incentive to the pot, shall we? Every single person who gets implicated is also subject to DEA seizure. That means they get to take anything that touches drugs. Did you drive a car with drugs in it? it belongs to the DEA. Did you ride in a friend's car with drugs in it? It belongs to the DEA. Store drugs in your house? It belongs to the DEA. Store drugs in your landlord's house? It belongs to the DEA.
Along with everything in it.
Let's take my buddy Dante. He was addicted to Meth. He got clean for the sake of his life, and for the sake of his son. And then his buddy, who helped him get clean, told him that he needed 2 kilos of coke to make it across town by 5 or the Zetas would kill him. So my buddy Dante got the keys out of a mailbox, got in the car and started it up.
The car? The DEA's. The drugs? The DEA's. Dante's buddy? Trading up the chain, giving up Dante rather than the guys the DEA wanted because Dante couldn't make him show up headless on the side of a freeway outside Amarillo. Dante, of course, had no one to give up so he was charged with trafficking and faced a ten year bid for a first offense. Lost his truck, lost all his musical equipment, is a felon forever.
Well yeah. Shouldn't have gotten in the car. No shit. But if you think policing, public order, the war on drugs or any civil good has been advanced by this travesty of criminal justice you're not only high, you're evil.
And that's what's wrong with it. Dante is real. The seizures are real. The dead on the side of the road outside of Amarillo is my sister's ex-boyfriend. And here's the DEA, getting low-level smurfs to snitch on each other for fun and profit while the Coast Guard siezes 225 tons of coke.