What cognitive bias (loosely) makes us all the more susceptible to the golden age fallacy 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 cognitive bias behind nostalgia is called rosy retrospection:


  ... 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.