In my experience, a blended approach is best. I like to have a set list, and it's carefully thought out and curated. I'm not afraid to change it on the night depending on what happens though. If the police enter the venue for an inspection and we're away to start a new song, you can bet your life that we'll just jump straight into "Breaking the Law", for instance...
Also, no-one wants to wait for a committee meeting to come to agreement on the next song. Seen that happen before with bands without set list, cringe.