"The AI is playing more historically, I'd say. When, if ever, did the French OR the British put together a fighting fleet of 60 ships? You'd have to reach back to the Spanish Armada to find the like, and that was an administrative nightmare for Spain, besides becoming a unmitigated disaster. Huge fleets should be penalized, not utilized."
"More logical would be to require smaller squadrons to maintain control of sea areas vital to trade by stationing patroling squadrons in an area. No fleet in the area means lots of pirates, additional losses to trade, loss of victory points. That would better simulate the need, then, to maintain a naval presence in key areas."
"That's really beside the point. It's not the relative sizes of the fleets that's the problem, it's how the AI (mis)uses them. Obviously no human player would sit there and let your monster fleets gobble up his smaller fleets piecemeal."
We're not really disputing each other.
The AI does not seek decisive battles (ummm, that'd be Klauswitz, not Mahan, right?) Its' penny-packet squadrons are useful for putting down pirates and raiding far-flung empires.
However, it will put together its naval forces for substantial attacks, not as a sea force but as a landing force. It doesn't really think 'navy'. AI land forces don't seek to destroy your army and then start seiging... they go seige and permit the human to choose the time of battle. The exception to this is when you seige their provinces and are near success. Then, the AI will attempt to break your seige by attacking.
The Naval AI seems to understand interdiction and this it tries to do. The problem is not with the AI's understanding but its inability to calculate the outcome of an obviously one-sided battle. I believe the small squadrons you see 'attacking' you are actually just trying to interdict a sea lane you possess. The AI needs to be told that such interdiction is of less priority than simple survival.
On the other hand, it clearly understands pursuit for I've often seen it win a naval battle and pursue the beaten force from one sea area to the next for consecutive victories.