Yeah, I always agreed with the Dunmer on that point. At least the Daedra have a vested interest in Mundus and her creatures. The Aedra always stuck me as more the bad guys then the Daedric Princes, that is of course, aside from the Four Corners of the House of Troubles.
A vested interest like a cat is invested in a ball of string, sure.
But the *Psijics (spelled that grossly incorrect) removing themselves from active duty as it were, is what I think biggest reason the Guild fell. Without new knowledge and a helping hand to control its use, magic seems to have stagnated.
The Psijics and the Guild have had little interaction. Even if the Psijics were the innovators you make them out to be, they wouldn't share it with the world. Heck, the CoW questline was pretty much "Psijics think that magic needs to be in the proper hands. Don't you agree? No? How about now after a power-hungry Machiavellian abuses magic?"
Heck, Artaeum basically said they knew this was coming (and mostly could've just gotten rid of it if they really wanted to at any point), but they didn't. I'm not surprised if they were doing it just to get the College aligned with their views on magic.
What were we talking about? Oh, yeah, magickal knowledge definitely seems to have declined since 4E1.