The lottery player, unable to think clearly about money, both overvalues and undervalues it.
He overvalues it inasmuch as he thinks that a big win would be a wonderful thing even though it would probably not be, and won't occur in any case for the vast majority of players. There are plenty of examples, some reported here, of people who have been destroyed by a sudden huge windfall. For instance,
Willie Hurt of Lansing, Mich., won $3.1 million in 1989. Two years later, he was broke and charged with murder. His lawyer says Hurt spent his fortune on a divorce and crack cocaine.
But even if the windfall does not lead to death or divorce or bankruptcy or prison, it will not make one happy or give one's life meaning. Happiness simply cannot be bought. At most, one buys the absence of misery. But for that a modicum suffices. For example, it is difficult to be happy in a bad neighborhood in which crackheads roam the streets and gunfire interrupts one's sleep. But to have the wherewithal to move from such a neighborhood one doesn't need to win the lottery. One needs to finish high school, get a job, keep one's nose clean, save and invest, and give oneself a course in personal finance.
The lottery player, therefore, overvalues money in that he thinks it will provide things it cannot possibly provide: happiness, satisfaction, meaning, love. But he also undervalues it in that he wastes it on lottery tickets! He doesn't understand the value of a buck and the additivity of small amounts of money.
Suppose you blow $5 per diem on lottery tickets. That comes to over $150 per month. If you apply that amount to your mortgage payment you may reduce your 30 year mortgage to a 20 year mortgage thereby saving thousands upon thousands of dollars in interest. If the interest rate is X%, the return is an immediate certain return of X%. An investment with no risk! So what does our innumerate fool do with his $150 per month? He throws it away on astronomically small chances of winning some huge amount, which, if he won it would make his disordered life even more disorderly.
And note that the very fact that the innumerate fellow is so foolish as to gamble away money in the first place in a game in which the odds are the worst possible shows that he is completely unequipped to deal with any money he wins.
There are many arguments against playing lotteries, and against state sponsorship of lotteries. More later. But for now, read this.