Why do objects appear smaller far away?

Answer: They take up a smaller angle in your field of view

The air between you and them visually shrinks them — Air does not cause the ordinary shrinkage of a distant object’s image. Haze can reduce clarity, but a more distant object occupies a smaller angle even in a vacuum.

Your brain deliberately scales down distant objects — The smaller retinal image is not created by the brain deliberately shrinking the object. It follows from the geometry of incoming light, though the brain can use distance clues to judge the object’s actual size.

They take up a smaller angle in your field of view ✓ — The same object occupies a smaller angle at your eye as its distance increases. Your eye therefore forms a smaller image on the retina. For an object small compared with its distance, doubling the distance roughly halves that angle.