Why are pygmies smaller?

This paper uses a life history perspective and data from two pygmy populations from the Philipito answer that question. I've only read the abstract, but it sounds like that they are arguing that being forced into early reproduction selected for less energy into body growth, due to high mortality levels. Why high mortality?... I don't know...maybe just being in the tropics?.. the answer is probably in the paper.
via Razib's GNXP

Life history trade-offs explain the evolution of human pygmies

Andrea Bamberg Migliano, Lucio Vinicius, and Marta Mirazón Lahr

PNAS Published online before print December 11, 2007

Abstract: Explanations for the evolution of human pygmies continue to be a matter of controversy, recently fuelled by the disagreements surrounding the interpretation of the fossil hominin Homo floresiensis. Traditional hypotheses assume that the small body size of human pygmies is an adaptation to special challenges, such as thermoregulation, locomotion in dense forests, or endurance against starvation. Here, we present an analysis of stature, growth, and individual fitness for a large population of Aeta and a smaller one of Batak from the Philippines and compare it with data on other pygmy groups accumulated by anthropologists for a century. The results challenge traditional explanations of human pygmy body size. We argue that human pygmy populations and adaptations evolved independently as the result of a life history tradeoff between the fertility benefits of larger body size against the costs of late growth cessation, under circumstances of significant young and adult mortality. Human pygmies do not appear to have evolved through positive selection for small stature—this was a by-product of selection for early onset of reproduction.