Here's a quote from Martin S. Jaffee's Early Judaism (New Jersey: Prentice Hall, 1997):
"Like all worlds built upon the symbolic triad of God-Torah-Israel, that of the Sages accorded special cosmic significance to the people Israel as well. Among this people, after all, the eternal Torah had come to rest in the world of time. Israel embodied within the world God's original plan for the entire human order--to incorporate all of life under the canopy of the divine will as expressed in the Torah" (117).
Here are some reactions:
1. Does this mean the sages believed everyone should obey the Torah? Some (mainly Christian preachers) argue that there's a strand of rabbinic literature that answers "yes." One rabbinic passage makes the point that God gave the Torah in a place that did not belong to any country: Mount Sinai. But what I've continually learned is that the rabbis believed Jews had to observe the Torah, whereas Gentiles only had to perform the seven Noachide laws. How can this be, if the sages depicted the Torah in cosmic terms?
2. I've heard before that Israel was a microcosm of the rest of the world. At Harvard, Gary Anderson illustrated the presence of such an idea in the Hebrew Bible. The Book of Genesis lists seventy nations (Genesis 10), and seventy sons of Jacob went to Egypt (Genesis 46:27). God also gave to Israel an institution that he established at creation: the Sabbath (Genesis 2; Exodus 20).
3. Jaffee discusses Genesis Rabbah 1:1, which interprets Proverbs 8:30-31 to mean that God "looked into the Torah and created the world" (115). I once asked a professor how that worked in the natural sphere. I could understand God creating the moral laws of the world from the Torah, but how did he derive scientific laws from it? My professor responded that the Torah contains assumptions of how the natural world works. For example, Genesis 1 distinguishes among animals and their realms. And so God looked into the Torah and created the world according to those distinctions and natural laws.