As a new kind of jurisprudence and theory frame, the paradigm of law and economics includes a series of basic hypothesis, methods, fundamental categories and theorems of law and economics, all these compose the theoretical foundation of the paradigm of law and economics. On the basis of recounting the theoretical precondition and hypothesis of the economics such as rational choice, scarcity and perfect information, the author has studied the formation of the legal rules and the reaction of lawyer under the vested legal rules. The fundamental concept of law and economics is transaction costs, it also includes a series of propositions and important deduction of transaction costs in law. The theorems of law and economics include Smith Theorem, Normative Hobbes Theorem, Coase Theorem, Posner Theorem and so on.