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Just curious as to the reasoning, is it a spec, or is it simply 'backwards compatibility'?

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In the UK, it is often called 'ex 2 by 4' but bigger then the sizes you give. More like 1.8" by 3.8" – Walker Nov 11 '10 at 20:36
It's not backwards compatible in application (perhaps in terminology, though). If you look at rough-cut studs in an old house they will be very close to 2" by 4". – Dennis Williamson Nov 11 '10 at 22:59
up vote 19 down vote accepted

The 2x4 refers to the rough-cut green wood: it shrinks during drying, then the dried wood is planed smooth, so the finished lumber is supposed to end up at 1.5"x3.5". While it doesn't really shrink that much, the mills get more usable finished 2x4's from a given tree if they cut them slightly smaller to begin with.

Here's the Wikipedia article about it.

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It doesn't have to be green wood - just rough cut. – ChrisF Nov 11 '10 at 20:32
I think the type of wood also shrinks differently as well. – Brian Nov 12 '10 at 15:24

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