Mike:
My dates were wrong. The Forest Products Lab in Madison, WI started the In-Grade Testing Program in about 1978. The objective of the program was to come up with more reliable design values for existing grades of commercially available lumber, and to adjust grading rules to meet currently available lumber. They were testing full size dimensional lumber members which had already been graded, not just small clear samples. And, in the early 90's the new allowable properties started showing up in the supplement. And, of course, they added reams of statistical complexity to the whole process, so then they needed more size factors, and other adjustment factors, etc. etc. Look for a good write-up in Wood Engineering text on wood properties and grading, that should give you some direction and understanding. You might also look at the history of several of the ASTM standards on lumber grading and allowable lumber properties.
It makes me wonder how some of my older building are still standing, given how much I didn’t know about the need for a 1.03 size adjustment factor and what I still don’t know or understand about how much better the newer versions of the codes are for us all. If only we would get paid for all the time we waste on this crap. But then, I’ve never seen a building failure attributed to someone forgetting to apply a .96 or 1.09 adjustment factor; and have seen plenty of problems caused by stupid detailing or just not paying attention to how a structure really act and reacts to the way it was framed or detailed.