The connection between macro-particle shape functions and non-physical phase-space "heating" in the particle-in-cell (PIC) algorithm is examined. The development of fine-scale phasespace structures starting from a cold initial condition is shown to be related to spatial correlations in the interpolated fields used in the Lorentz force. It is shown that the plasma evolution via the PIC algorithm from a cold initial condition leads to a state that is not consistent with that of a thermal plasma.