Every knowledge-based institution, whether government, business or nonprofit, engages in a fierce battle for top talent. As deputy mayor for economic development and rebuilding for New York City and chief executive officer of Bloomberg LP, I’ve seen firsthand that the better the people, the better the institution. That is why I find recent criticisms of the hiring and compensation policies of New York University and its president, John Sexton, to be so puzzling.

Bringing world-class faculty and administration to NYU, which has been astonishingly successful over the past decade under President Sexton’s leadership, doesn’t happen by accident. Often it requires the same kinds of inducements that we offer to accomplished executives in the private sector. Unlike corporations, whose executives are often content to settle in surrounding commuter areas, the unique value of living within an academic community leads most NYU faculty to cluster near the Washington Square campus. Our dense urban lifestyle stands in stark contrast to the leafy neighborhoods like Cambridge, Palo Alto, Princeton or Ann Arbor that are home to other top-notch universities. Without tools like relocation bonuses, housing assistance or even loans to purchase a second home outside the city, New York’s high cost of living and the challenges of luring a family not accustomed to the intensity of the city would severely hamper NYU’s ability to compete for top academic talent.

The results of President Sexton’s recruiting policies speak for themselves. Few institutions can rival the remarkable ascent of NYU up the rankings of leading universities over just a few short years. NYU’s faculty includes a growing number of Nobel laureates and National Medal winners in science and technology. The university today boasts world-class professional schools (law, business, medicine, dentistry, public affairs and education), and its Ph.D. programs are steadily rising in nearly every academic discipline. And there is perhaps no better sign of NYU’s exalted academic standing than the frequency with which its star talent is recruited for leadership positions at other universities. The director of the London School of Economics, the president of Princeton, the president of the European University Institute, the current dean of the University of Chicago’s Law School and the last dean of Stanford Law School all emerged from NYU’s faculty.

A growing reputation for talent ignites a virtuous cycle. As leading talent joins the university’s faculty and staff, outstanding junior faculty, fellows and students are more likely to make that university their first choice, raising its academic standing. Pride among alumni rises, making them more likely to provide financial support that the university can reinvest in projects like improving the physical campus, enhancing academ ic programs and increasing the endowment. All of these improvements in turn help attract more talent, perpetuating the virtuous cycle. And as the cycle turns, the need for inducements actually declines over time, because the nonmonetary factors that lead recruits to choose one opportunity over another become more appealing.

That’s exactly what’s happening at NYU. Coincident with the rise of the university’s academic standing, in just the past 10 years, undergraduate applications have grown by 45 percent to 42,000, the number of incoming freshmen with SAT scores of 1500 or greater has nearly doubled, annual alumni giving has nearly tripled and NYU is increasingly a first choice for prized talent.

As an unabashed cheerleader for New York City, I’m also excited by the benefits of NYU’s rise on the neighborhoods around its campus. You just have to walk the streets of Greenwich Village to recognize that it is once again one of the most dynamic and creative neighborhoods in the city (in the world’s most creative and dynamic city), bolstered by a building boom fostered by NYU, which has extended from Manhattan to Brooklyn, and by the addition of hundreds of more faculty and the thousands of other jobs that NYU’s expansion has directly or indirectly created.

Generous compensation practices are an easy target, but attacks on NYU are off base. By investing in faculty and staff, President Sexton and the university’s leadership are building a stronger institution that benefits NYU’s students, alumni and employees, not to mention the hundreds of thousands of New Yorkers who live in neighborhoods the university has helped reinvigorate. Given the dramatic transformation these policies have effected, the cost seems like a no-brainer.