Back in the late 1600's, the Dutch invented the two-sheet mold. The average maximum stretch of an experienced vatman's arms was 44". Many molds at that time were around 17" front to back because the laid lines and watermarks had to run from left to right. Sounds big?...well to maximize the efficiency of paper making, a sheet this big was made, and then quartered, forming four 8.5" x 11
This was well before paper machines dominated hand made paper labor. A couple centuries later when machines dominated the trade (although many hand made paper makers still existed), and the United States decided on a standard paper size, they stuck with the same size so as to keep the hand made paper makers in business.
Oddly enough, the United States used two different sizes - the 8" x 10.5" and the 8.5" x 11". Separate committees came up with separate standards, the 8" x 10.5" for the government and the 8.5" x 11" for the rest of us. Once these committees found out about each other a couple years later, they agreed to disagree until the early 1980's when Reagan finally proclaimed that the 8.5" x 11" was the official standard sized paper. United States History
Not until World War I or shortly after was a standard paper size agreed to in the United States. Interestingly enough, within six months of each other, two different paper sizes were set as the standard; one for the government and one for the rest of us.
1. In 1921, the first director of the Bureau of the Budget established an interagency advisory group with the President's approval called the Permanent Conference on Printing which established the 8" x 10½" as the general U.S. government letterhead standard. This extended an earlier establishment made by the former President Hoover, the Secretary of Commerce at the time, who established the 8" x 10½" as the standard letterhead size for his department.
2. Now, during the same year, a Committee on the Simplification of Paper Sizes consisting of printing industry representatives was appointed to work with the Bureau of Standards as part of Hoover's program for the Elimination of Waste in Industry. This group came up with basic sizes for all types of printing and writing papers. The size for "letter" was a 17" x 22" sheet while the "legal" size was 17" x 28" sheet. The later known U.S. letter format was these sizes halved (8 ½" x 11" and 8 ½" by 14").
Even in the selection of the 8 ½" x 11", no special analysis was made to prove this was the optimum size for commercial letterhead. The Committee that developed the sizes did so using one objective - "to reduce inventory requirements for paper into sizes which would cut from a minimum trimming waste."
1. Labarre Dictionary of Paper and Paper-Making Terms, 1937 Edition.
2. Kuhn, Markus . 1996. http://www.cl.cam.ac.uk/~mgk25/iso-paper.html
3. Dunn, A. D. 1972. Notes on the Standardization of Paper Sizes. http://www.cl.cam.ac.uk/~mgk25/volatile/dunn-papersizes.pdf