as defined by nearly every drug FAQ in existence, set refers to an individual's state of mind, including but certainly not limited to their attitude, belief system, and personality. setting refers to the place in which a drug trip takes place.

Much of each person's experience with psychedelic substances is based on SET and SETTING. Set refers to a person's mental and emotional makeup, expectations about the experience, cultural upbringing, etc. Setting is the immediate environment and stimulus present during the experience, whether outdoors or in a building, with friends or alone, the presence or absence of music, artwork, etc.

If I had to choose one setting as being the most conducive to a positive experience, I'd pick one which most closely resembles the time honored methods of using these substances. This would involve taking a natural psychedelic like mushrooms or Peyote. It would be done outdoors in nature, away from the noise and activity of any city and with a group of respected friends or family. For novices being initiated into the psychedelic world, the session would be guided by trusted and experienced "elders".

- from The Essential Psychedelic Guide by D. M. Turner

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