This paper aims to explore the application of law and economics in public policy and legislation. The US Food Stamp Act of 1977 is the case to be examined. The legislation of the food stamp programs provides a robust evidence of efficiency and equity in the context of consumer choice theory and transaction cost of microeconomics. Several economics models are provided to support the efficiency argument. This paper concludes that the food stamp program has created the maximum utility of low-income households through a subtle allotment of free subsidized food. The law prevents the welfare from being abused by recipients. In these regards, the FSA is a role model of welfare legislation with great policy implications, which deserve attention from both policy-makers and academics in law and economics circles in Taiwan.