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Here’s the publisher’s explanation of whether The Message is a translation or a paraphrase:
Since Eugene Peterson worked with the text strictly from Greek and Hebrew to English, he did what a translator does by choosing contemporary English words that best express the meaning of the original language. As all translators do, he used interpretative skill in choosing those English words. However, he “paraphrased” the original by selecting language that communicates the style and flavor of the original in Bible times—rather than trying to achieve word-for-word correspondence. Translation is generally thought of as bringing the meaning from one language to another, whereas a paraphrase is usually a rewording of a document within the same language. But in a sense, all translation also involves paraphrasing. There is no distinct line that can be drawn between the two. Sometimes it takes five English words to bring across the meaning of a single Greek word; other times only one English word is required to communicate five Greek words.
When Eugene began his work on The Message, he looked at how scholars had translated Homer from Greek to English. Some had tried to match word for word; others attempted to recreate the poetry of Homer in English. The Message leans toward the latter. Eugene’s intent was to recapture the tone, to bring out the subtleties and nuances of the Hebrew and Greek languages while keeping a sense of firsthand experience for contemporary readers. He often asked himself, “If Paul were the pastor of my church, how would he say this?” or “If Jesus were here teaching, what would it sound like?”
So, is it a translation or a paraphrase? It is probably most accurately called a paraphrase—an intelligent paraphrase. It is a bridging of the gap between the original languages and English, and between centuries of time and language change, to bring to us the Bible as it originally sounded.