> Some see a university education as an example of this: it costs cleverer and more conscientious types less to get a degree than stupider and lazier ones, allowing employers to distinguish between the two.
Wait, how? If two people both have a degree, how does that help distinguish who is stupid?
I think they mean it probabilistically: given the cost, a "stupid and lazy" person is less likely to get a degree, so employers can hope that the percentage of such people among university grads will be lower than in the general population.
The case you are confused by is a version of the model there. The relevant material is covered in any intermediate-to-advanced microeconomics textbook.
on average the "cleverer" ones get the degrees easier, hence there's a higher chance to pick a "cleverer" candidate if selecting by this criterion than when selecting at random
Wait, how? If two people both have a degree, how does that help distinguish who is stupid?