We haven't been able to pin down an exact reason, but... the most convincing theory these days suggests that there are multiple factors leading to the decline of magic.

First off, it's believed that there's a limited amount of magic in the world to begin with. Mages have generally been a fairly small percentage of the population, but even a small percentage of over six billion human beings is going to be an extremely large number, so it's spread more thinly nowadays than it was when, say, there were only a few million humans in existence. An individual human soul has less "weight" to it now than it would have five thousand years ago.

Second, the gods stopped being a factor in everyday life, which caused a transition from the Age of the Gods to the Age of Man. This had its own impact on the amount of magic and knowledge in the world, as well as allowing life to become far safer for humans. This, of course, lead to the problem addressed in my first point.

Finally, the population increase caused humans to spread out over the entire globe, which lead to the decay of the Unified Language of ancient Babylonia. This language was spoken by every being that existed back then, and it is thought to be intimately connected to the root of all knowledge, Akasha.

I'll admit that was a lot of information and it was all a bit complicated, so if you don't understand any of it, I'll be happy to explain further.

[don't blame him for this wall of absurd magibabble. blame yourself... or Nasu.]