Why do the good ol' days seem better than they actually are? Is this a result of an error in human thought or is it because things are actually worsening?
... the psychological phenomenon of people sometimes judging the past disproportionately more positively than they judge the present.
A common explanation for this phenomenon is Socioemotional selectivity theory (SST):
The theory maintains that as time horizons shrink, as they typically do with age, people become increasingly selective, investing greater resources in emotionally meaningful goals and activities. According to the theory, motivational shifts also influence cognitive processing. Aging is associated with a relative preference for positive over negative information in attention and memory (called the "positivity effect").
Related to this, but somewhat different is the Pollyanna principle:
... (also called Pollyannaism or positivity bias) is the tendency for people to remember pleasant items more accurately than unpleasant ones.