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When they just used 4 digit numbers, towards the end it was literally just use whatever numbers were still available.
An article about it would be very interesting though!
When LEGO brick sets first started in 1949 all sets started with a 700/x number, where x = 1 to 6 (there was 3 and 3A), or 700A, 700B, 700C, 700E, 700F.
Then in 1955 TLG switched model and parts pack set numbers to 4 digits... such as parts packs of Denmark, Norway Sweden....
The basic set numbers at that time remained 3 digits... 700/1 (largest) thru 700/6 (smallest), plus 700A (bricks pack) and 700C windows pack.
Also introduced in 1955 was the very first LEGO model set, the Esso Service Station... 1310 as a 4 digit number. This December 1955 Danish brochures mentions its' introduction on December 1, 1955.
In 1956 when Germany came online with LEGO, all set numbers were only 3 digits (the Esso Station was 310). While Denmark, Norway and Sweden continued to have 4 digit model and parts pack numbers, Germany, and then in 1957 Netherlands, Switzerland, Austria, Belgium and Portugal followed Germany's 3 digit lead... and in 1958 all Scandinavian sets started following the continents 3 digit numbers.
Here are the 1957 introduced (top to bottom) VW Service, VW Showroom, Fire Station and Church sets... showing the Scandinavian 4 digit numbers, and the continental 3 digit numbers...
So by 1958 all set numbers were 3 digits... and with the exception of the large USA/Canada Samsonite 7100 Educational wooden box set (1961-65), all 1960s set numbers were 3 digits... well into the 1970s.
The 1650 Maersk Line Container Ship of 1974 was the next 4 digit number. There were other promotional sets in the 1970s, 1980s and beyond that had 4 digit numbers. But it wasn't until 1980 when 4 digit set numbers were widely introduced. But even then basic sets and spare parts packs continued to have 3 digit numbers. But special basic sets had 4 digit numbers at that time. By 1990 4 digit numbers were pretty much standard. And it wasn't until the new millenium that 5 digit (and also 6 or 7 digit numbers were introduced for special sets).
For example, the Castle System... in the 1980s they were all 6xxx set numbers (except for those that were carryovers from the 1970s, which were 3xx 3 digit numbers). And in the 1990s 4 digit set numbers were scattered under different groupings. For example Castle System sets in the 1990s are known with the 1xxx range, a few in the 2xxx range, more in the 3xxx and 4xxx range, and most in the 6xxx range.
This scenario gets repeated in most other LEGO Systems, although you will likely find some sets, such as the 2000s LEGEND line of sets all had 5 digit numbers in the 1xxxx range.
Like I said, there is no logic to how set numbers have been allocated in the past... and I don't see it changing to anything more logical in the future... at least not yet.
(Images from my Unofficial LEGO Sets/Parts Collectors Guide computer desktop online guide)