If you've identified the "best" candidate for a position and want to hire or retain that person, you're now competing with the other offers available to that candidate (which include CoL-adjusted offers), not with the salaries you're paying other employees.
Well, I think the idea is meant to be that you get the best developers possible, regardless of where they are, while still trying to keep expenses minimal.
Would you pay more money for the exact same product made in a different city? How is hiring developers different?