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If terms are arbitrary designations like Saussure says then does semantic idealism [language does not refer beyond itself] not collapse into scepticism?

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Idealism is certainly sceptic about the existence of an external world, but not about truth generally: idealists will construe truth as a matter of coherence of one's representations rather than correspondence to the world (a belief is true if coherent with our whole set of beliefs--this is kind of holistic).

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It seems to me that the epistemological "categories" of idealism and scepticism are not well apt to describe the theories of Ferdinand de Saussure :

Saussure posited that linguistic form is arbitrary [...]. According to Saussure, a language is arbitrary because it is systematic, in that the whole is greater than the sum of its parts. Also, all languages have their own concepts and sound images (or signifieds and signifiers). Therefore, Saussure argues, languages have a relational conception of their elements: words and their meanings are defined by comparing and contrasting their meanings to one another [see : Structuralism].

The idea that there is no causal connection between the "external" characteristics of the object dog and the linguisitc characteristics of the word "dog" does not necessarily imply that there are no dogs.

You can consider the so-called Sapir-Whorf Hypotheses (and see also : Philosophy of Linguistics), and in particular its more "extreme" expressions, like :

Whorf “new principle of linguistic relativity” (Benjamin Lee Whorf, Language, Thought and Reality, 1956: 214) asserting that :

the background linguistic system (in other words, the grammar) of each language is not merely a reproducing instrument for voicing ideas but rather is itself the shaper of ideas, the program and guide for the individual's mental activity, for his analysis of impressions, for his synthesis of his mental stock in trade. Formulation of ideas is not an independent process, strictly rational in the old sense, but is part of a particular grammar, and differs, from slightly to greatly, between different grammars. We dissect nature along lines laid down by our native languages. The categories and types that we isolate from the world of phenomena we do not find there because they stare every observer in the face; on the contrary, the world is presented in a kaleidoscopic flux of impressions which has to be organized by our minds—and this means largely by the linguistic systems in our minds. We cut nature up, organize it into concepts, and ascribe significances as we do, largely because we are parties to an agreement to organize it in this way—an agreement that holds throughout our speech community and is codified in the patterns of our language. The agreement is, of course, an implicit and unstated one, but its terms are absolutely obligatory; we cannot talk at all except by subscribing to the organization and classification of data which the agreement decrees. (Whorf 1956: 212–214; emphasis in original)

Later, Whorf's speculations about the “sensuously and operationally different” character of different snow types for “an Eskimo” (Whorf 1956: 216) developed into a familiar journalistic meme about the Inuit having dozens or scores or hundreds of words for snow; but few who repeat that urban legend recall Whorf's emphasis on its being grammar, rather than lexicon, that cuts up and organizes nature for us.

As you can see, also in this case we have an "interplay" between our mental/social way of "organizing" our language and our concepts and the experience.

Assuming that the Inuit are able to differentiate many more "types" of snow that we (Western) are able to, it is exactly because they live in a "snow world" and not in the desert.

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