I wasn't sure if the AI had predictated policies or if it was more free form like you said.
It's a little of both. The way the AI works for policies is like this:
1> It will only ever have two unfinished policy branches at a time. So if it's unlocked the Tradition branch and the Piety branch, then it can't take any Honor, Order, etc. policies until it completes one of the two. (This number can be tweaked by mods.)
2> Even if it finishes one branch, it's highly motivated to finish the other instead of starting a new branch. (This can't easily be tweaked, but if designed right a mod can use this to its advantage.)
3> Other than the above, it selects policies purely on the basis of their Flavor values. Every policy in the game has a total Flavor of 20, so it doesn't see any policies as being more inherently desirable; it'll have preferences based on the personality of the leader or the needs of the moment (especially Happiness), but nothing beyond that.
This leads to some ridiculous situations, where the AI thinks the Communism policy is exactly as desirable as the Republic policy, despite the fact that the Communism policy's effect is exactly twice what Republic gives. (It used to be worse, when Republic was +1 and Communism was +5.) Both have FLAVOR_PRODUCTION=20, so the AI can't distinguish the two.
These Flavor values CAN be tweaked easily, but doing so can cause other problems, not the least of which is the exact problem I've described in this thread; if you raise the Flavors of the later policies, and the AI starts at a point where all are unlocked, then it'll never take the earlier, more general policies and will instead stock up on the later and often more powerful ones, which might not be worthwhile to an empire just starting out.
(You see this a lot if you start a game in a later era.)
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This is why it's important that only the first couple branches be available during the Ancient era; the Tradition and Liberty branches are designed to be all-around useful abilities, not specialized like many of the later ones. Once the AI has at least one of those, then sure, things like Honor, Piety, Patronage, Commerce, and Rationalism are okay. But the last three, Freedom, Autocracy, and Order, are ONLY worthwhile once your empire is large or your cities get huge. Making those be available early on will never work out well.
Now, if you're trying to have the game stop progressing at a certain point, or even just drastically slowing tech rates down, then sure, these can be moved up a bit to compensate. But the last three should never unlock before at least the Medieval Era; it's just too crippling to the AI otherwise.