Aviation manufacturers generally design the equipment to comply with legal requirements. Under FAA two hours is what is required by law.
14 CFR 121.359–Operating Requirements: Domestic, Flag, and Supplemental Operations–Cockpit Voice Recorders
(i) By April 7, 2012, all turbine engine-powered airplanes subject to this section that are manufactured before April 7, 2010, must have a cockpit voice recorder installed that also—
(1) Meets the requirements of §23.1457(d)(6) or §25.1457(d)(6) of this chapter, as applicable;
(2) Retains at least the last 2 hours of recorded information using a recorder that meets the standards of TSO-C123a, or later revision; and
(3) Is operated continuously from the use of the checklist before the flight to completion of the final checklist at the end of the flight.
(4) If transport category, meets the requirements in §25.1457(a)(3), (a)(4), and (a)(5) of this chapter.
[The following section has the same requirements for aircraft manufactured after April 7, 2010.]
The flight data recorder is required to retain 15 hours worth of data.
FAA allows pilots to erase anything on the CVR recorded 30 min (in some cases 15 min) prior. This is probably something that was negotiated between the NTSB and the pilots union to protect the pilots' privacy. Since it's written into the statute that way I assume modern digital CVR'S must have a function to erase everything but the last 30 min. (@OSUZorba there's that word again)
14 CFR 121.359 (f) In complying with this section, an approved cockpit voice recorder having an erasure feature may be used, so that at any time during the operation of the recorder, information recorded more than 30 minutes earlier may be erased or otherwise obliterated.
This was most likely in response to the 1979 incident that occurred on TWA flight 841 where the pilot was accused of improperly extending flaps during cruise but had erased the CVR when they landed, so they had no proof. At the time CVR's were still fairly new and pilots balked at having their conversations recorded for privacy reasons, so it was common practice to erase it after each flight. There is still some concern over privacy issues since in some situations the recording can open the pilot up to legal liability.
There are really only a handful of cases where a longer recording would have been useful, most of which involved pilot incapacitation. In 2014 EASA proposed extending the requirement. The European Cockpit Association, which represents pilots released a position paper .pdf stating that they would only support the extension if there were also systems in place to ensure that only the pertinent portions could be used and any other conversation could not be leaked to the public or used in jurisdictions where there are no legal requirements to maintain pilots' privacy.
ECA stresses the following:
Pilots submit to such recording under the strict condition that the CVR data is to be used exclusively by accident investigation authorities in the context of their safety investigations. Pilots are one of the few professions that agree to being recorded at their workplace and the consequent infringement of their privacy
National and European legislators recognise the need to protect CVR recordings (Reg. 996/2010). However, despite various legal provisions at EU and national level, as well as best practices in many airlines, CVR data or their transcripts have too often leaked to the public and media , exposing data with private and personal content – sometimes the last minutes of the crews’ lives – to a wide audience, generating speculation, interpretations and apportioning blame – in a way that may be far removed from what actually happened, what contributed to the accident and why.
This inappropriate use and distribution of sensitive CVR data beyond accident investigation agencies negatively affects Just Culture and the safety improvement efforts in Europe. Extending CVR duration would increase the quantity of data available for misuse significantly.
Leaking of CVR data results in speculation that increases the pressure on accident investigators, on the judiciary to act quickly to hold accountable those ‘responsible’, and on other authorities or public figures to come up with quick answers, rather than waiting for the Final Report to be published and generating mature safety improvements.
Increasing CVR duration would also increase the data that is potentially available to the airline management. While many companies in Europe have internal procedures – and sometimes agreements with the pilot representatives – in place to ensure sensitive data is not misused, this is not the case for all companies. Hence, an increased recording time – combined with very powerful digital storing facilities and the possibility to cross-check CVR and FDM data – would also increase the scope for (un)intentional (ab)use of such data by company management for other than safety purposes (e.g. any form of disciplinary measures). Although this would not be in line with EU legislation, not all airlines are as exemplary as some, and not all legislation is adequately enforced.
Increasing CVR duration on European aircraft also increases the risk of CVR data being used – and potentially made public – by non-European authorities, which are not bound by EU legislation and the protections contained therein. This is the case especially for long-haul operations (at which an increase of the recording time is actually aimed) where the majority of the flight is outside Europe. If an accident happens outside Europe, the national safety and judicial authorities will be entitled to seize the CVR and will be bound by their own local laws, by local political considerations, and general public pressure. – This would be an unintended – but very real – consequence that must be taken into account.