Also the city is actually an animatrionic Disney ride or something? I don't know.
Bort I say the city is more of a shared virtual reality world, and people are conscious / awake in the VR world to various degrees. Contradictions and implausibilities (such as how nobody but Roger Smith ever visits the subway system) are "smoothed over" by the fact that most people aren't particularly awake. Every now and again someone wakes up fully and, as far as the Paradigm City inhabitants can see, goes nuts from having their memories return.