It is originally cut out of a log as 2" by 4". Much of the size reduction happens in drying the wood. The rest is planed down to make it smoother and to get it to a consistent size. Why it's 1 1/2" by 3 1/2" specifically, I don't know.

Nails are measured that way supposedly because of how much they orginally cost. There are a number of theories, but they are all quite similar. One is that it cost 10 pennies (which was abbreviated at the time as `d' for `denarius') for a hundred, or 10d for a thousand, or a pound.

Speaking of British pennies, when did they stop being abbreviated as `d'? When you guys went from your old monetary system to the new decimal system (that was about 1965, right?)? Or was it further back than that?

Speaking of British pennies, when did they stop being abbreviated as `d'? When you guys went from your old monetary system to the new decimal system (that was about 1965, right?)? Or was it further back than that?

IIRC, it was 1st Feb, 1971.

Speaking of British pennies...

Yes, and it was 15th Feb 1971. See this and this.

Wow, you guys have all the answers
Yes I remember in school when it suddenly cost twice as much for my candy!