{ 1 } - we have no knowledge of external objects.
{ 2 } - statements about external objects can be translated into statements about our sensations.
{ 3 } - facts about our sensations can be evidence for beliefs about external objects.

Reductionists say that "This external object exists" means something of the form "We'd have such and such sensations under such and such conditions." Given this definition, it's easy to explain how we could know that external objects exist.

Chisholm objects that such definitions don't work. We can't define "This external object exists" in terms of sensations without also mentioning other external objects (e.g. observers) -- and this makes the definition circular.