The answer is simple really, sheep are living things, it is the wool that shrinks, not the animal beneath the wool. A wool sweater may shrink but it is not made up of “sheep” it is made up of the fleece that the sheep has produced. As well how the wool was treated makes it more prone to shrinkage.
What really causes a wool sweater to shrink is not so much the washing, but rather the drying. When the wet wool gets hot the fibers naturally cling together, they have a natural crimp that grabs on to the other wool fibers and do not want to let go.
An actual living sheep might get wet, but it does not get hot enough for this to occur. Also the woolen fibers on he sheep are all growing naturally in the same direction; from the skin out. Sheep hairs are not as smooth as human hairs, they even have minute scales, after being spun into yarn the fibers are all over the place, and the texture of each fiber grabs onto those next to it. If agitated further these fibers can be made into felt. This is why the hair of some animals can be spun into yarn, or made into felt, but you cannot do the same with hair from every animal.
So to get back to why the wool on sheep does not shrink, but the wool in sweaters does, we see that the wool in sweaters is not as well arranged as on the sheep – the fibers are going every which way, when you add water and heat, the fibers grab onto each other, pulling each other together resulting in shrinkage.
To prevent shrinkage, some wool is treated with chemicals to remove some of these scales, this does result in less shrinkage, but shrinkage in sweaters can also be prevented by not heating up wet sweaters – they can be dried safely with cool air.
If you happen to have accidentally shrunk your wool sweater you can “un-shrink” it by soaking it in warm water with a bit of hair conditioner added. Pull the sweater gently while it is soaking. Remove from the water and lay flat, pulling gently again relax the hold the fibers have on one and other, and to pull it back into its proper size.
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