EDIT: More ideas, a bit clearer language. 
Developing spying is an expansion thing, mostly. So I will consider it that way.
I would like spies to be invisible, but with the current model - where they require a small wonder and a tech - it becomes very unexciting.
The problem with having to build a wonder is that Firaxis gets severe unbalancing issues to solve: They must figure out how much inferior a civ should be when not having spies. Since it now requires both a tech and a wonder and the tech comes late, it can't really be made to be too powered (i.e. getting nukes soon), and so it makes sense that they haven't put a grand effort of the A.I. pursuing spying or using spying well.
As some here, I would also like to see spies a little earlier. Also, many of the ideas here before are good.
The A.I. use of spies should be a high priority in programming for the expansion, of course. Spying should be deadly and really annoying when used, but that requires a very, very skilfull A.I. opponent as well, both on defence and offence.
First, three different basic suggestions to implement spying:
1. First one to build the Kremlin gets a bonus on all spy units built thereafter. For example, a bonus level to all spies built (they should have levels), or that they are made cheaper. That way, it becomes a small race within the game to build the Kramlin.
But - all civs gain access to spies when the Kremlin is built. One can build unlimited spies. This way, spies are not really unbalanced by nature when they arrive, as all get them, and they can have more powerful special abilities.
(Really, the Manhattan Project should give cheaper nukes to the one who builds it, so there is a larger point in building it! perhaps 20% cheaper nukes or something, that way that's a race as well)
2. Spies are instead made accessible a lot earlier by a tech - not a small wonder. Kremlin is a small wonder and improves spying and the spy units and requires an experienced level 4 spy or something. This way it is a small race towards the tech, and Kremlin just boosts spies. With this model, at first spies shouldn't have overly powerful abilities, so even if you miss out for a while, you aren't dead. More wonders boosting spies here.
3. Spying comes earlier through a tech, but the Kremlin is a major wonder that boosts spying resistance in the civ. not invulnerable though.
I think no. 2 is my preference here. And as new techs are researched, more abilities are gained. Spying should be unlocked just after alfabet. If it is a tech that makes the spying available, perhaps a free spy unit is given to the first to discover it.
More suggestions regarding spying:
A. Stealing a tech shouldn't be so easy, but it should be possible. It might require both a few turns of spying in a city and a lot of gold.
B. Spy units should have a SMALL CHANCE of spotting each other each turn, say 30%. When spotted by the spy, they remain visible for that spy a number of turns. That gives the tech stealing suggestion above a fighting chance. This chance of spotting could increase by specializing them. Also, camouflage skill in a spy could increase the chance of dodging discovery by other spies. Also, a spy has a chance of dodging an arrest by an ordinary military unit. If they succeed their dodging chance, they are made invisible again! So only spies are certain to catch other spies. That means spy versus spy combat fulfills an important function. So a spy which is good at counter espionage (spotting other spies) as well as assassination could be useful home defence (spy versus spy combat) or on clearing other cities from spies so they don't see the other specialized units who are sent to do something else. All spies should have pretty much a range of basic abilities that all have. Spies should also be flagless even if spotted unless the spotting civ have seen them a few turns (then it becomes a diplomatic issue and penalty) or if they spy was lucky the first turn it saw the other spy unit (say (20% chance of seeing flag on a spotted unit + 20% when visible per turn.) Of course, if they are caught they should probably be revealed.
C. Spying should be very good and not overly expensive, but when caught the diplomatic consequences should be big i.e. a large minus, so the risk is mostly not in money, but in relations. That way it's more the knife on the edge with spying. In fact, all decisions to implement the spy nit better should go towards excitement, not fear of making it too powerful. Aim at making the A.I. of the opponents better instead of than making spies less powerful just because it is work programming spies well with the A.I. Beta testers should be good at helping with this.
D. Civic choices, like police state and mercantilism and the like should perhaps give opponent spies a harder time. Universal suffrage/Free speech should give them an easier time. Firaxis should look into which civic choices are the clear favourites to the players, like Universal suffrage, and representation, and then put a spying bonus against civs using those civic choices.That would balance things up nicely. It would be interesting as well if emancipation had this penalty for spying.
F. There should be buildings that make spying harder(lower % chance). Perhaps police stations, courthouses for example. I rather it be the existing buildings that be boosted rather than a special building that only prevents spies. Make polls on what leaders are prefferred in MP and SP games. That leads to good conclusions in what traits are unbalanced and which buildings that can be boosted. I'm a lot for dual purposes for buildings in this case, so that the buildings get more exciting, instead of more buildings, but each with less usefulness.
G. A nation should be able to become a power through spying ability. There should be wonders that boost this, making spies a major power if an effort is put on it. Also it would be nice with a spy barracks, but only if the A.I. knows how to use it well.
H. A religious civic choice for boosting spying would be nice. A more "terrorist" like choice, boosting the chances of the destructive choices for the spies. Perhaps they can blow up buildings easier, planting nukes easier and so on...
I. The wonders possible that boost and hinder spies are limitless almost. But no wonder should render a civilization totally immune; one reason for this is that the A.I. usually doesn't handle that well at all. Another reason is that it is actually really boring.
Possible wonders: A wonder that spawns one free spy and give all spies in the empire a boost on stealing techs or another powerful ability.
A wonder that spawns a spy each five turns. Wow...
J. Espionage ability boost could be a trait on new creepy leaders as well. Think about the most treacherous and deceitful ones.
A unique unit in a civ could now be a spy unit that is a little bit better, perhaps better at not revealing its flag to anyone, and at not being caught, not actually better at the missions. That would make a civ really, really creepy.
As long as the A.I. is competent with using spies, it would be interesting. Interesting stuff this.
In conclusion, I would like to say that spying should be a game within the game. Right now it is a only sidenote, but that can be corrected. Make everything in the game count as much as possible!
And most importantly, don't make spying abilities too expensive, make A.I. and diplomatic consequences huge instead! That has more sizzle to it.

Developing spying is an expansion thing, mostly. So I will consider it that way.
I would like spies to be invisible, but with the current model - where they require a small wonder and a tech - it becomes very unexciting.
The problem with having to build a wonder is that Firaxis gets severe unbalancing issues to solve: They must figure out how much inferior a civ should be when not having spies. Since it now requires both a tech and a wonder and the tech comes late, it can't really be made to be too powered (i.e. getting nukes soon), and so it makes sense that they haven't put a grand effort of the A.I. pursuing spying or using spying well.
As some here, I would also like to see spies a little earlier. Also, many of the ideas here before are good.
The A.I. use of spies should be a high priority in programming for the expansion, of course. Spying should be deadly and really annoying when used, but that requires a very, very skilfull A.I. opponent as well, both on defence and offence.
First, three different basic suggestions to implement spying:
1. First one to build the Kremlin gets a bonus on all spy units built thereafter. For example, a bonus level to all spies built (they should have levels), or that they are made cheaper. That way, it becomes a small race within the game to build the Kramlin.
But - all civs gain access to spies when the Kremlin is built. One can build unlimited spies. This way, spies are not really unbalanced by nature when they arrive, as all get them, and they can have more powerful special abilities.
(Really, the Manhattan Project should give cheaper nukes to the one who builds it, so there is a larger point in building it! perhaps 20% cheaper nukes or something, that way that's a race as well)
2. Spies are instead made accessible a lot earlier by a tech - not a small wonder. Kremlin is a small wonder and improves spying and the spy units and requires an experienced level 4 spy or something. This way it is a small race towards the tech, and Kremlin just boosts spies. With this model, at first spies shouldn't have overly powerful abilities, so even if you miss out for a while, you aren't dead. More wonders boosting spies here.
3. Spying comes earlier through a tech, but the Kremlin is a major wonder that boosts spying resistance in the civ. not invulnerable though.
I think no. 2 is my preference here. And as new techs are researched, more abilities are gained. Spying should be unlocked just after alfabet. If it is a tech that makes the spying available, perhaps a free spy unit is given to the first to discover it.
More suggestions regarding spying:
A. Stealing a tech shouldn't be so easy, but it should be possible. It might require both a few turns of spying in a city and a lot of gold.
B. Spy units should have a SMALL CHANCE of spotting each other each turn, say 30%. When spotted by the spy, they remain visible for that spy a number of turns. That gives the tech stealing suggestion above a fighting chance. This chance of spotting could increase by specializing them. Also, camouflage skill in a spy could increase the chance of dodging discovery by other spies. Also, a spy has a chance of dodging an arrest by an ordinary military unit. If they succeed their dodging chance, they are made invisible again! So only spies are certain to catch other spies. That means spy versus spy combat fulfills an important function. So a spy which is good at counter espionage (spotting other spies) as well as assassination could be useful home defence (spy versus spy combat) or on clearing other cities from spies so they don't see the other specialized units who are sent to do something else. All spies should have pretty much a range of basic abilities that all have. Spies should also be flagless even if spotted unless the spotting civ have seen them a few turns (then it becomes a diplomatic issue and penalty) or if they spy was lucky the first turn it saw the other spy unit (say (20% chance of seeing flag on a spotted unit + 20% when visible per turn.) Of course, if they are caught they should probably be revealed.
C. Spying should be very good and not overly expensive, but when caught the diplomatic consequences should be big i.e. a large minus, so the risk is mostly not in money, but in relations. That way it's more the knife on the edge with spying. In fact, all decisions to implement the spy nit better should go towards excitement, not fear of making it too powerful. Aim at making the A.I. of the opponents better instead of than making spies less powerful just because it is work programming spies well with the A.I. Beta testers should be good at helping with this.
D. Civic choices, like police state and mercantilism and the like should perhaps give opponent spies a harder time. Universal suffrage/Free speech should give them an easier time. Firaxis should look into which civic choices are the clear favourites to the players, like Universal suffrage, and representation, and then put a spying bonus against civs using those civic choices.That would balance things up nicely. It would be interesting as well if emancipation had this penalty for spying.
F. There should be buildings that make spying harder(lower % chance). Perhaps police stations, courthouses for example. I rather it be the existing buildings that be boosted rather than a special building that only prevents spies. Make polls on what leaders are prefferred in MP and SP games. That leads to good conclusions in what traits are unbalanced and which buildings that can be boosted. I'm a lot for dual purposes for buildings in this case, so that the buildings get more exciting, instead of more buildings, but each with less usefulness.
G. A nation should be able to become a power through spying ability. There should be wonders that boost this, making spies a major power if an effort is put on it. Also it would be nice with a spy barracks, but only if the A.I. knows how to use it well.
H. A religious civic choice for boosting spying would be nice. A more "terrorist" like choice, boosting the chances of the destructive choices for the spies. Perhaps they can blow up buildings easier, planting nukes easier and so on...
I. The wonders possible that boost and hinder spies are limitless almost. But no wonder should render a civilization totally immune; one reason for this is that the A.I. usually doesn't handle that well at all. Another reason is that it is actually really boring.
Possible wonders: A wonder that spawns one free spy and give all spies in the empire a boost on stealing techs or another powerful ability.
A wonder that spawns a spy each five turns. Wow...
J. Espionage ability boost could be a trait on new creepy leaders as well. Think about the most treacherous and deceitful ones.
A unique unit in a civ could now be a spy unit that is a little bit better, perhaps better at not revealing its flag to anyone, and at not being caught, not actually better at the missions. That would make a civ really, really creepy.

In conclusion, I would like to say that spying should be a game within the game. Right now it is a only sidenote, but that can be corrected. Make everything in the game count as much as possible!
And most importantly, don't make spying abilities too expensive, make A.I. and diplomatic consequences huge instead! That has more sizzle to it.
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