The size of insects is to some extent, self-limiting. The mechanisms that carry oxygen to their muscles are simple, and involve no conventional "blood circulation". This means that if they get bigger than a certain size the oxygen will not be able to penetrate far enough. The Goliath beetle is about as big as it gets, and even that has special adaptations to allow it to grow to that size. In the time of the dinosaurs, there was a lot more oxygen in the atmospere, and insects grew much bigger - dragon flies (meganeura) with two-feet wingspans for instance.
The other reason for the size of ants, is that they are "the right size for the job". Evolution has resulted in many different species of ant, and various (but usually very small) sizes.
If you think of an ants nest as being a "super organism", of course, then they really aren't that small.
